<p>Northwestern - I absolutely would report the scholarships/tuition that accurately reflect what took place during the 2008 tax year. I am guessing from your original post that your daughter is a freshman, so report the fall tuition and the fall scholarships. If you don't have billing statements then go to your school's website and print off the information from the bursars account and file it with the taxes to support what you are reporting.</p>
<p>northwestern,
I have the exact same problem and have the same concern about taxes for the last year of college. So I took a look at the billing statements and saw that while tuition for spring semester was charged last Nov 2008, the FA scholarships are marked as "ANTICIPATED FINANCIAL AID CREDITS" until the Feb 2009 statement, when they came through. So I think that's why tuition for the full year, but FA scholarships for only fall semester show up on the 1098T.</p>
<p>I might call up the school, but I think the answer will be, "that's the way the billing works". So I'm going to keep records as scm advises and just report fall semester for 2008.</p>
<p>Here is a link to an interesting (though very long) article in the CPA journal about 1098_T statements. It talks about what we are seeing here - that schools report information inconsistently and often incorrectly on the 1098T. One error they quote finding in a 1098T is exactly what you described - that the school included scholarships that were for the next year leading to taxable scholarship income being overstated. The consensus in the article seems to be that you report the correct information on your taxes, whatever the 1098T says.</p>
<p>Navigating</a> the Form 1098-T Tuition Statement: Inconsistencies in Reporting
[quote]
Two schools included in Box 4 scholarships and grants for the January through March 2004 academic period. This box is to include only those amounts received by students during the calendar year and could cause scholarship income for the year to be overstated on students tax returns. One school compounded the problem by not including the tuition for the same January through March period in Box 2. The result was a mismatching of scholarships and grants to the applicable tuition.
[/quote]
</p>
<p>It also mentions the fact that certain expenses such as required books are not shown in the 1098T and these can be used to reduce taxable scholarships (but not for the hope credit)</p>
<p>
[quote]
Another issue arises if the IRS uses the amounts reported in Boxes 2 and 4 to match taxable scholarship income to the amount reported on a tax return. In addition to tuition and fees, the law allows students to reduce taxable scholarship income by any required books, supplies, and equipment. Schools have no way of knowing these amounts for each student and could not (nor are they required to) report the amounts on Form 1098-T. The IRS would err by using Form 1098-T as a matching document for taxable scholarship income.
[/quote]
</p>
<p>(this link was originally posted by another poster in another thread - I have found it quite useful)</p>
<p>Why do some 1098T say not report to the IRS even though it refelct tutiotn and fee paid and scholarship monies? Is it possible some scholarships are not taxable, perhaps alumni scholarships?</p>
<p>The taxability of a scholarship is based on what the money is spent on, not where it comes from. if an alumni scholarship is spent on qualified expenses it is not taxable. If it is spent on non qualified expenses it is taxable.</p>
<p>I don't know why a 1098T would say that. Maybe they are saying you need to make sure to check your own figures and not rely on the 1098 (which would seem to be true based on our experience and some posters on CC).</p>
<p>Thanks, swimcatsmom - The more I read the confused I become.</p>
<p>What the IRS says is that the scholarships are tax free if you can deduct qualified expenses that match or exceed the income. </p>
<p>In order to be able to deduct those qualified expenses, you need to be
· a candidate for a degree at an eligible educational institution, and
· using the scholarship or fellowship to pay qualified education expenses. </p>
<p>It is MUCH simpler to state that ALL academic scholarships represent taxable income but that the recipient of a scholarship can lower his or her taxable income by deducting the qualified expenses one incurs when pursuing a degree at an eligible educational institution.</p>
<p>It is really a whole lot simpler than it seems. All one needs to do it match the income and expenses to the actual disbursements, ,make sure that ALL scholarships funds paid in a year are reported, and that ONLY qualified expenses are deducted from the income. For the qualified expenses, you have the option of following the school accounting system or the actual payments made to the school.</p>
<p>Thank God. I was beginning to think I was the only one. In doing my sons tax return this evening--he earned a grand total of 1300 last year --, the 1098-t thing came up on TaxAct. I entered the information which was basically amnt.billed for qualifying expenses:$31,433(line2) and scholarships and grants:$30,793(line5) at which point taxact said my son owed fed/state taxes of over $3000. Yes he lives on campus and some of the sch/grant covers his room and board. What I don't get is how on earth could he/we pay that since 14k of this money is from a need based (guaranteed access)state grant. If we had 4k laying around I would never get -0- as my EFC on FAFSA, would I??? We are practically poverty level, my AGI 2008 was 12k. According to IRS, tuition related expenses DO NOT INCLUDE Room and Board. I don't understand at all, last year when he was a freshman, we had no tax liability even though the figures were proportionately half of the above, and some 5k for room and board.</p>
<p>I am seriously frightened here. I had no idea AT ALL that I would need thousands to pay in taxes for scholarships and grants.</p>
<p>Donnie,</p>
<p>SOmething is definately wrong with those calculations. I suggest you print up a 1040EZ and put in the numbers manually. There will be a tax liability, but not 3K</p>
<p>For example, let's just say that $10,000 of the scholarship money went towards non qualifying expenses (room and board) Line one would say SCH 10K plus the 1300 he earned last year. His AGI (line 4) woul be 11300. He would then take a standard deduction of 5400 (there's a worksheet on the back of the 1040EZ to determine this. His taxable income would now be 5900. His tax liability should be about $600 (federal) not 3K. Plus any state tax liability.</p>
<p>Plus, I think I went a little high in determining money that went towards room and board. PM me if you have any questions</p>
<p>Donnie, I cant delete my post, but I just realized that your 1098 showed that qualified expenses exceeded the amount of the scholarships. I'm not sure how you figure that some of his scholarships went towards room and board. Basically, according to the numbers on his 1098 there is no tax liability.</p>
<p>donnie - It does sound like you made a mistake somewhere if the 1098 says the qualifying expenses exceed the scholarships/grants. Did you perhaps also include the scholarships in income when you were income questions?</p>
<p>thanks so much for your replies...I agree that something is wrong. After my post at 3 in the morning, I went back to taxact and "manually" typed in what the numbers were according to the actual bill from Hood College...I got a different number altogether;$ 232 in fed taxes, but this does not take into account the 4500 in stafford loan which is not included on the 1098-T. Can I apply the stafford loan amount towards the expense of Rand B thereby cutting that liability in half? I will find out tomorrow when I call the school. I think you are correct, though, as the amount of "qualified" expenses exceeds the grant/sch amount and perhaps I/we are not liable at all. </p>
<p>sigh. It has been one hell of a 24 hours, here I am again after midnight obsessing about this. I spent 6 hours today getting a grip on the tax laws and sorting through every document from the school--and this is just with my oldest son. My middle son is also in his second semester as a freshman at Berklee with over 28k in sch/grant/stafford loan. Fortunately (not really, but) I took out a plus loan for his Rand B so I can't possibly owe taxes there.</p>
<p>Thanks for your comments, again. I cannot wait be done with this business of FAFSA. I had a Jim Cramer moment today told my kids, "You have NO IDEA what I'm going through here. NO IDEA." LOL. Trying to keep a sense of humor. . .</p>
<p>I don't quite understand your post. Stafford loans are not reported anywhere on the tax return. As they are a loan that must be repaid they are not included as income at all. (If that is what you are saying).</p>
<p>The IRS publication for education expenses is IRS 970 - you may find it useful to have a read through it. The taxable scholarships/grants section explains what expenses may be used to make grants/scholarships (basically tuition/fees and required books) non taxable and has a little form you can use to calculate it on page 6.</p>
<p><a href="http://www.irs.gov/pub/irs-pdf/p970.pdf%5B/url%5D">http://www.irs.gov/pub/irs-pdf/p970.pdf</a></p>
<p>I kind of figure it out how to put the numbers on my tax return. Like swimcatsmom said, I think it is more make sense to put the amount with my own actual calcualtion rather than the 1098-T. I hope IRS realizes that the 1098-T can not provide the accurate numbers on the tax forms, like the article on the CPA journal says. </p>
<p>Now, I have to determine the designation of her scholarship money on the tax form. I may get some education tax credit if I report her scholarship as taxable income on her tax return. But it will may affect the next year's efc since she will have a big income(wage plus scholarship) on her tax return. Oh well..... now I understand that why college students parents get more stressed in the tax season than other people.</p>
<p>The scholarship as taxable income on her tax return should not affect her EFC next year. It is included in the AGI but you also enter it elsewhere in FAFSA (46d this year) and it, as well as any WS income, is deducted from her income by the EFC formula before the EFC is calculated.</p>
<p>Likewise with the tax credit on the parent return. You report your actual tax from your return on FAFSA but you also list any education tax credits under question 94a and your income is reduced by the amount of the credit. </p>
<p>The aim is tht your student's EFC is not penalized because of aid received or education tax benefits.</p>
<p>Hi - new to all of this online chat.. daughter is in 4th yr- has 2 1098-T; 1 was a Comm Coll in the summer; the other the main Univ. Her line 2 is about 1/2 of what line 5 is. We were monetarily challenged and she received a full ride and some, with Scholarships/Grants. What do I do??</p>
<p>Donnie,</p>
<p>In post #28 you say that you entered line 2 of the 1098-T, amount billed. Did you actually pay that amount in 2008? Line 2 on my son's 1098-T includes the amount billed in August and in December. We did not pay second semester until Jan. 2009 so we can't use the amount shown in line 2. The IRS instructions for Form 8863 are very clear on this:
[quote]
caution! You cannot use any amount paid in 2007 or 2009 to figure your 2008 education credits.<a href="You%20can%20%22pay%22%20with%20grants%20and%20scholarships,%20of%20course.">quote/</a></p>
<p>
</p>
<p>Here's more support for using the actual amounts on your taxes and not the numbers reported in box 1 or 2. First, box 7 is checked which indicates that some of the tuition amount shown is from 2009. Second, on the back of the form the "Term Code" is given for tuition and scholarships; this clearly shows that half the tuition came from 2008 and the other half came from the first term of 2009, while the scholarship came only from 2008.</p>
<p>this form is stressful all i got was a number on line 4(adjustments made for a prior year) and i have no idea what to do with it. gotta love when a college i stopped attending in spring 2007 hits me with a curve ball</p>
<p>I ran into this last year…it seems to hit Freshman parents especially hard. After having two lengthy discussions with financial aid/cashier’s office at son’s college; an ADDITIONAL two discussions with very nice IRS agents on their hotline (yes, I got their agent ID numbers for later!) and a talk with good friend (an IRS auditor),they all said the same thing. After sleeping on it; I realized IT IS UP TO YOU. However, once you embark on a path regarding adjustments to 1098t’s you must be consistent, year to year. I too was faced with a more in scholarship/grant funds that was shown in “qualified expenses”; as my son’s tuition for spring 2009, even though paid in December 2008, was not shown as an expense. Per the IRS, you can deduct any amounts paid in 2008 for first three months of 2009, etc. ALL of the spring semester… or if you elect, just PART of the semester. Remember, if you move ALL the 2009 expenses into your 1098t; you may be faced with much more grants/scholarships on student’s senior year than you have expenses though, as you’ve moved all of it to the year before. KEEP GOOD RECORDS, AND BE CONSISTENT!</p>