<p>My daughter has a combination of scholarships that somewhat exceed her tuition, books, and fees. The scholarships have no restrictions that they are required for tuition only. Her only other income was a few hundred bucks teaching music lessons. I had the impression that the room/board portion is considered taxable. </p>
<p>So I filled out a 1040EZ, the minimum standard deduction is larger than the scholarship excess, so nothing owed and no refund. However, her school's financial aid officer wrote to say that her scholarship was <em>not</em> taxable since we would have received a 1099 (we got a 1098 instead). They want me to file an amended 1040 showing just the $400 in income minus the scholarships.</p>
<p>Let me get this straight - the school’s financial aid officer is telling your daughter how to file her federal taxes?
I would take him the form and have him complete it and sign it as a tax preparer. gratis, of course. ;)</p>
<p>I am astounded that the financial aid officer would either know or care how you filed a return. There was no need to even file a return if the taxable portion was less than the standard deduction. To amend a return that was not required to be filed and resulted in no tax is just ridiculous.</p>
<p>A poster on another thread who claims to be a finaid officer also indicates she advises parents to amend their tax returns. I am surprised that these employees would create potential legal exposure for themselves and their institutions, but apparently it happens.</p>
<p>I believe the poster to whom you are referring is Kelsmom. She advises people to amend their return when it is in fact, wrong. But in this case it isn’t.</p>
<p>The aid officer had a copy of filed 1040 in front of her, as requested for verification. I still have not heard back after asking for clarification. This puts me in a bit of an awkward situation, what if they have been incorrectly telling people that room/board is non-taxable for years.</p>
<p>I should point out that the smaller deduction allowed for the state taxes (Michigan) does result in about $70 tax due. I wasn’t sure if it was possible to file a state form without a federal form.</p>
<p>Yes it is. Although honestly, with no 1099 and no Federal return, it’s not like Michigan would ever find out. But it is possible. We file many returns for kids who have no filing obligation for the IRS but they do for Michigan.</p>
<p>Hmm … I have had to deny aid for a student who should have claimed income on her return from grants/scholarships but did not (as she asked me about it, showed me her 1098T, and then I had no choice but to follow up on it - and she decided against filing the amended return). Not the other way around, though.</p>
<p>The only thing I can think of is that they are not allowing you to reduce the student income related to the taxable portion of the scholarships that she put on her tax form (since this reduces the student portion of the EFC) … and because of this, they say having it on the tax form constitutes conflicting information. Definitely follow up on this to find out what the reasoning is & if it is indeed correct.</p>
<p>If the school that your student attends is in a declared Midwestern Disaster Area, for 2009 scholarship amounts used to pay room and board are not taxable (although in a normal year they would be). This is spelled out in IRS publication 970. Does this have anything to do with your situation?</p>
I thought the special treatment schools in midwestern disaster areas get is that room and board expenses can be used to claim the hope tax credit. I don’t think scholarships used for room and board are non taxable anywhere.</p>
<p>Well, I finally heard back from the financial aid officer, I sent her IRS pub970 Table 1-1 which (to me) shows that room/board is taxable. </p>
<p>“From her research, only funds above the cost billed by the school are taxable.
If it was taxable, she would’ve received a 1099.” </p>
<p>Much of the officer’s reasoning depends on the fact that my daughter did <em>not</em> get a 1099 form. I don’t know whether the school or IRS determines who gets a 1098 vs a 1099 form. What if she <em>should</em> be getting a 1099 form?</p>
<p>She tells me to let her know if I do <em>not</em> want to amend her form (inflating her income).</p>
<p>Any advice, it is a small school and I don’t want my D labeled a “problem”.</p>
<p>From experience, I can tell you that taxable scholarships are sometimes reported on a 1099, sometimes on a W-2 and sometimes on a 1098-T. Either way, they are taxable.</p>
<p>I can’t tell you what to do about a financial aid officer that is clearly wrong. But again, even if she were correct, amending a return that didn’t need to be filed in the first place is just silly.</p>
<p>If it is financial aid it should not inflate your DDs FAFSA income as it should be listed as financial aid reported on a tax return (previously a question on, I think, worksheet C, not sure with the new short FAFSA) Any finaid $ reported as taxable income need to also be subtracted out from income for EFC calculations.</p>
<p>If it is not taxable, let me know and I will amend some of DDs tax returns!</p>