Please Help -- reporting 1098-T scholarship amount

Paying for College
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<p>I've read several posts in this thread that have helped me understand my situation better, but some extra input could greatly increase my chances of filing my taxes correctly. </p>

<p>Here is my situation:
I graduated in May 2012. I am an independent student and have been ever since attending college. Therefore, every year I have received Stafford Loans, Scholarships and Grants. My college files 1098-T information by when tuition is billed, not necessarily by calendar year. </p>

<p>For my final semester in college, they billed my tuition and expenses (5042) in December 2011, but they were actually PAID with loans first in January 2012. $388 of this was not used and refunded via check to me. Then, a couple of weeks later in 2012 my scholarships and grants came through, totaling $4925. </p>

<p>Now, my college only reported the $4925 in the scholarships/grants box on my 2012 1098-T form and NOTHING in boxes 1 or 2 (tuition expenses paid/billed). I have my account ledger proving my tuition was paid for by loans in 2012. </p>

<p>My questions is, can I claim the AOC with the $5042 paid for my tuition with loans? And then would I have to report the extra scholarship income (refunded to me via check) as taxable income? I went to H&R Block earlier this evening and the guy had no idea what I was talking about, claiming I could not do that. Note: my scholarships were not specified to be used for qualified expenses. Another note: I DID claim the AOC last year, but my college had reported my Spring 2012 tuition on the 2011 1098-T (becuase that is the year when it was billed). </p>

<p>What are my options? Thanks in advance</p>

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<p>I’m not an expert, but I think you need TurboTax.
Also, from what I’ve read here, it only matters when the money changed hands. So the $5042 paid in 2012 would go on 2012 taxes and the Spring 2012 tuition would be on the 2011 1098-T only if it was payed in 2011.</p>

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<p>Thanks for your input beolein. I did try using Turbo Tax (did not file, just entered in my info to see what my refund would be) and what I did, was say that I had not received a 1098-T, but said i paid the 5042 in tuition. I then entered my 4925 in scholarships as “Other taxable income”. Am I correct in doing this?</p>

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<p>I’m not an expert either so I don’t know if I can give you a final answer but here are some additional questions and thoughts on this.</p>

<p>The first thing that matters here is whether you can be claimed as a dependent on someone elses taxes. Being independent for FA is not necessarily the same. Hopefully you can’t since you claimed the credit for 2011.</p>

<p>Was 2011 the first year you claimed the AOC or Hope credits? You can only take these credits for 4 years. Did your 2011 1098T have the spring 2012 billed amount included in box 2 and was box 7 checked? Did you include the amount billed for spring 2012 when claiming the credit for 2011? You can’t use the same expenses to claim the credit in 2 different years.</p>

<p>If the tuition(5042) was paid for with loans, what were the scholarships and grants applied to? It would help if you posted everything on your spring 2012 bill, the dates billed, the dates scholarships/grants were applied and the date you paid with the loan and the amounts of the scholarships and grants. First you said the $388 refunded was from the loan but later you said it was from scholarships.</p>

<p>Were there room and board charges on the spring 2012 bill or did you live off campus. When other people post here about applying scholarships/grants to R&B instead of tuition/fees, they have R&B charges on the bill. I don’t know if you can shift them to non-billed R&B costs.</p>

<p>If you do this, it wouldn’t only be the refunded amount that would be taxable, it would be the amount of scholarships/grants applied to anything other than tuition/fees and books.</p>

<p>A tax program may help with this but you still need to know the correct amounts to enter for all the questions it will ask.</p>

<p>Edit: cross posted with your last post</p>

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<p>Hey annoyingdad, thanks for your reply. I will try to answer all of your questions as well as provide additional information. </p>

<p>I am an independent student, therefore no one else claims me on their taxes. </p>

<p>As for the 2011 1098-T, yes my Spring 2012 tuition was included in Box 2 and Box 7 was also checked. However, upon looking at my 2011 refund, only $4,000 of my tuition billed was used towards earning the AOC credit. I took the AOC credit last year but not in prior years, so under those circumstances I would still be eligible to take the credit.</p>

<p>I lived off campus my junior and senior years, so the scholarships and grants I received a refund for in 2012 were used for rent, transportation, etc. since I was not working during school and those were not specified to be used just for tuition/expenses. </p>

<p>The two scholarships (totaling 4925) that I received a refund for in 2012 were the Commonwealth Award (2100) and a Federal Pell Grant (2775). </p>

<p>Here are my charges and payments broken down according to a print out of my student account information that I requested from the college:
-December 5, 2001: Tuition and Fees charged (5042)
-January 9, 2012: Federal Stafford Loans paid for expenses (5430) (388 was not used so it was refunded to me the same day)
-January 23, 2012: Commonwealth Award applied to my account (2100, and full amount was refunded to me via check)
-January 24, 2012: Federal Pell Grant applied to my account (2775, and full amount was refunded to me via check)</p>

<p>So, the 4925 in scholarship refunds was deposited into my bank account so that I could use it for rent, transportation, etc. basically to get by while I was in school (I did this every year as well as other students who needed money for rent and other expenses while living off campus). </p>

<p>I’m assuming that I just entered my 2011 1098-T information for my 2011 taxes, but I cannot find anywhere that proves this, because as stated before my 2011 refund only shows that $4000 in expenses was used to claim the AOC credit.</p>

<p>Back to my original question, since I have proof (from student account info) that my Spring 2012 tuition, although billed in December 2011, was billed in January 2012…shouldn’t I be able to apply those expenses paid to this years taxes? If so, what about the scholarship refund checks I also received in 2012? If I enter my 2012 1098-T info as-is on either Turbo Tax or H&R Block online, they try to apply my scholarships first, thus resulting in no AOC. But, if I enter that my loans were used to pay for tuition/expenses and put scholarship as “other income” it does give me the credit.</p>

<p>From my understanding, the IRS tells tax preps to subtract scholarships from expenses first, but I also believe i should be able to choose to say that my loans were used to pay for tuition (that’s what my account info says).</p>

<p>Edit: my 2012 1098-T form only listed box 5, scholarship/grants for 4925 and nothing in any other boxes (except that I was at least a full time student becuase I attended school during 5 months of 2012)</p>

<p>The online tax programs want me to enter my 1098-T info but upon reading other threads, people have been saying that this form is only used as a guideline for filing and the exact amounts don’t have to be used if expenses were actually paid in 2012</p>

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<p>Make an appointment with an IRS offfice and go over this with a rep there.</p>

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<p>Is that necessary though? Is there no definitive answer as to whether you can report scholarship refund money NOT used to directly pay for tuition as taxable income? </p>

<p>I’ve read some posts on various websites that state you can add scholarship income not used for QEE on wages line with the description “SCH”?</p>

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<p>OP: excluding 2012: on how many tax returns have you (and your parents) claimed the Hope Credit or AOC on your tuition?</p>

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<p>no I have not claimed the AOC except for last year</p>

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<p>…what about the Hope Credit?</p>

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<p>I claimed the AOC last year, even if my parents claimed either AOC or Hope credit for 2009 or 2010, which I don’t think they did (at least not both years) that would only be three years that the credit was claimed, not four. </p>

<p>Under these circumstances only I would be eligible for AOC.</p>

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<p>So what should I do?</p>

<p>ideally, i would ignore the 1098, and say that 5042 was PAID in 2012 for spring 2012 tuition (which i can prove via student account info)</p>

<p>then, i would use excess scholarship income refunded to me (and used for things like rent, transportation to school, etc. and not for QEE) as “other taxable income”</p>

<p>this would allow me to obtain the AOC for teh 5042 i paid with loans</p>

<p>what should i do?</p>

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<p>I don’t know that anyone here is going to tell you what to do except you can read all the detail about the AOC and taxable scholarships/grants in IRS Pub 970 if you haven’t already and then decide for yourself. There is one poster on this board who works for a tax prep company and perhaps they will chime in.</p>

<p><a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p970.pdf&lt;/a&gt;&lt;/p&gt;

<p>Note that the expenses you need for the max AOC credit is $4,000 so there would be no need to make more scholarships/grants than that ‘artificially’ taxable.</p>

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</p>

<p>I think you need to look more closely at what you did for 2011. How many semesters of tuition/fees were in Box 2 of the 2011 1098T? Only fall 2011 and spring 2012? Was spring 2011 in there too or was that on the 2010 1098T? Were your scholarships/grants the same for 2011 and did you report any taxable scholarships/grants for 2011? What I’m saying is you need to make sure none of the expenses for 2012 on the 2011 1098T were used to claim the AOC or to exclude scholarships/grants as taxable income for 2011. You can’t use the same expenses to claim the AOC or exclude scholarship/grants from income in two different tax years.</p>

<p>Also, if you didn’t see this other thread, the IRS isn’t processing tax forms claiming education credits until mid February so there isn’t a big rush with this.</p>

<p><a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/1453824-irs-delays-processing-returns-educational-credits.html[/url]”>http://talk.collegeconfidential.com/financial-aid-scholarships/1453824-irs-delays-processing-returns-educational-credits.html&lt;/a&gt;&lt;/p&gt;

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<p>my 2011 1098t contained bill expenses for Fall 2011 and Spring 2012, as well as scholarships/grants from spring 2011 and fall 2011 (i guess that is just how the school reports their information?). So basically what I was left with on my 2012 1098t was scholarships from spring 2012. You can see why im confused! I requested a copy of my 2011 return from the IRS to see what they have on file for me, to see if I included the exact 1098t information on my taxes and go from there…</p>

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<p>You are allowed to change the information on the 1098-T when you enter in into a tax software program. I use taxact, and it even says right on the 1098-T screen that you should adjust to reflect amounts actually paid during the year (not billed, paid).</p>

<p>The whole key is understanding the big picture, and backing up all your calculations in case of an audit or question. If you’re positive the Hope and AOC could only have been claimed a total of three times on your SSN, you should be fine there (I’d really make sure though).</p>

<p>Next, create a spreadsheet by calendar year. One for 2011, and one for 2012. I’d go even further back if your parents ever claimed either credit. Calculate total qualifying education educational expenses (tuition, fees, and textbooks), actually paid, by semester. Break it down by line item so you can see exactly what and when it occurred. Print your tuition statements and/or receipts for textbooks so you have proof to back this up. After you’ve calculated qualifying educational expenses, make another spreadsheet to list all the scholarships and grants you received, by the semester you actually received them. Don’t include loans. What you need to know is the total amount of qualifying educational expenses, and the total amount of scholarships/grants that you received, by calendar year.</p>

<p>No matter what you decide to do, this will help you figure it out much easier, plus you’ll have documentation if the IRS comes knocking.</p>

<p>How your 2011 1098-T was handled last year matters. Obviously, you used $4000 of qualifying educational expenses for the AOC last year, but you really need to get out your 2011 1098-T, compare to the spreadsheets you just made, and see what happened. For example, if you only had $4000 of qualifying expenses, that could have come from the difference you’re seeing on the 2012 1098-T. Which means you can’t use it again without filing an amended return and including some scholarship/grant money as taxable last year. This could very easily be the case if you also received scholarships/grants last year. That $4000 could have come ENTIRELY from the expenses billed in 2011 that were actually for 2012. If this happened, the only way for you to take the AOC this year (2012) would be to file an amended for 2011, thus including some scholarship/grant money as income. </p>

<p>Yes, you can include “extra” scholarship and grant funds in taxable income and claim the AOC on it, but there are other rules, too. If the scholarship/grant specified it must be used for tuition/fees/books, you have to allocate it there without an option to include it back into income and take the AOC. Also, the portion you allocate as used for NON-Qualifying expenses cannot exceed cost of attendance for that item. So, it’s a good idea to print out a copy of the COA and COA breakdown, too. From what you’ve said, though, it doesn’t look like you’d have problems in this area.</p>

<p>I guess what this comes down to is you need to see what happened last year before you can determine what you can do this year. Also know that I’ve now run across tons of tax preparers, and even my brilliant tax professor (an ex-IRS court judge) who have no idea about this. Luckily, my professor at least semi-understood what I was asking and pointed me in the right direction to research it myself. I prepare other people’s taxes as a VITA volunteer, and I would never even mention this, as it’s not the way they teach us, and way too complicated to try and explain. I get blank looks from even the most experienced preparers, so I quit trying. It’s just something pretty obscure that no-one would understand unless they had come across it before. Having taxable scholarship/grant income is rare enough, and 99% of those people are just going to think that scholarships - qualifying expenses = taxable income with zero AOC potential. If you do end up needing help, you’ll have to be very careful to go to someone who knows exactly what you’re talking about or you’re wasting your time and money. It’s not their fault, they’ve just been trained otherwise and educational expenses only pertain to a fairly small portion of the tax returns they deal with anyway!</p>

<p>On a side note, remember that the IRS isn’t accepting returns with the AOC until February 15th!</p>

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<p>So what I’m seeing is that if your 2011 1098T had about $10.1k QEE and you claimed $4k of that as paid by you for the AOC and you had about $9.8k scholarships/grants, then you needed to report about $3.7k as taxable scholarship income for 2011. </p>

<p>You didn’t keep copies of your 2011 return? You should always do that.</p>

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<p>Another thing you need to consider with taxable scholarships is how your state treats them if your state has an income tax. Taxable scholarships are earned income for federal purposes, but my state treats them as unearned income. That lowers the state standard deduction resulting in tax being paid on more of the scholarship amount.</p>