I have used Free Tax USA for the last two tax years. I am including my son’s 1098T info on our return for the first time this year since he is a full time student and our dependent. Free Tax is allowing the AOTC. Just for kicks, I started a return using Turbo Tax’s free online site and using the same info it says we don’t qualify. My son had both scholarships and loans . Any ideas as to why the same information is treated differently? The loans and scholarships each covered about 50% of the expenses so how do you determine whether the QEE expenses were paid for with loans or scholarships?
By not reducing the expenses by the loans amount.
Yes, loans are like cash you paid for this purpose. There are a couple of very useful threads on this in the FA forum.
I only entered the amounts from boxes 2 & 6 and the sites calculated the rest.
Make sure the amounts for 2 and 6 are the actual amounts. I used the college bill/statement. Don’t forget textbooks, mandatory fees and any required equipment - that stuff isn’t on the 1098T.
I started with TurboTax this year and got annoyed for several reasons so switched to H&R Block. That one hasn’t been perfect either but I like it better for this.
It should be
box 2 billed qualified tuition and related expenses and
box 5 total scholarships and grants
If box 2 was higher than box 5, then you should be able to get AOTC.
If box 2 was lower than box 5 then you might still be able to claim AOTC by declaring some of the scholarship taxable (paid for non QEE) and including that amount as taxable income on student return.
The TT trial return, was it for parent or student?
Our D’s school sent a 1098T that was accurate as far as total tuition and fees billed and total scholarships received. So we were able to use the numbers on the 1098T to calculate our QEE, we added book expenses to box 2 though.
^ good catch - it’s box 5, not 6, where scholarships are.
Parent’s return.
Loans are not be included on 1098-T, and no need to enter them on any tax forms.
Ok, then I don’t know why it worked with Free Tax USA and not TT.
What are the numbers in boxes 2 and 5?
helpful link
BTW it mentioned that reporting on the 1098T will change for 2016. Only box 1 is supposed to be used then.
What are the numbers in boxes 2 and 5?
Box 2: 8684.54
Box 5: 10602.00
“If box 2 was lower than box 5 then you might still be able to claim AOTC by declaring some of the scholarship taxable (paid for non QEE) and including that amount as taxable income on student return.”
I did this…TT asked if some of the scholarship was used for R&B. I entered 3,000. It then said that my son would have a taxable income of 2,000 as a result. His only income is 1040 from work study so he is under his standard deduction of 6300.
I don’t know why FTU gave you the AOTC with box 2 lower than box 5, unless you made some scholarship taxable there as well. TT should have handled it. Sometimes it depends on how you answer the interview questions.
Anyway if total scholarships were $10,602 and you paid non QEE (room and board) with $3,000 of that then $7,602 of scholarship is left to cover QEE. Your tuition and fees were $8,685, how much were books?
Total QEE (tuition, fees, books) - $7,602 scholarships used for QEE = QEE for AOTC
So you would end up with $1,083 AOTC without books, more with books.
Your son would add $3,000 of taxable scholarship income to his work study income. If the sum does not exceed $6,300 he would not owe tax on it.
Could you make more of the scholarship taxable? Then you could get a higher AOTC.
“Anyway if total scholarships were $10,602 and you paid non QEE (room and board) with $3,000 of that then $7,602 of scholarship is left to cover QEE. Your tuition and fees were $8,685, how much were books?”
I thought that as well, but TT said only 2,000 was taxable for my son. We did add 250.00 for books. They may have been a little more but I don’t remember the exact amount.
I don’t want to increase the taxable scholarship amount any more. I just want to make it so that we don’t owe anything and I don’t want him to owe anything either.
It was advantageous for me to add taxable scholarship to D’s return and take the full AOTC, I’ll just pay her tax. I still come out ahead.
I would consider that except that his Dad and I have an installment agreement in place with the IRS so any refund we be applied to that which under normal conditions would be great but not if that left us to pay any tax our son would owe.
I set up an account for my son on TT and entered the same information on his return as ours (from the 1098T) showing the 3,000 as taxable income, etc. Of cource, it says that he does not qualify for the AOTC since he can be claimed by someone else.
Interestingly, it only shows his standard deduction as 4,390 and not 6300. But overall it shows a refund of $1…so as long as he does not owe anything, I’m happy.
@CDG1228 , I think what you are suggesting, then, is that that you are willing to pay more in taxes to the IRS by not claiming as much of the AOTC as possible, so that you can preserve a little bit of cash flow for your son.
Have you run the numbers different ways? It would seem to me that it might be worth your son paying $50 or so for you to save an few hundred - meaning you would be that much closer to paying down the IRS debt. Especially since your son would still have a couple of months to come up with that tax amount.
I obviously don’t know all of your numbers or how you and your H got into the situation you are with the IRS currently, but it is likely more complicated than just what you posted above.
Looks like he could possibly include another $2000 or so in taxable scholarships and not owe anything.
Subtract the work income from $6,300 (maximum standard deduction) and that is the amount he can report as taxable scholarship income and still have 0 taxable income.
Otherwise if you don’t want to claim AOTC and you don’t want him to pay tax (which in your case is not mutually exclusive) then why not just subtract tuition, fees and books from total scholarships and report that as taxable scholarship income? Why make $3,000 taxable by allocating it to room and board if it provides no benefit?
Why not get the maximum credit (which reduces your balance owed with the IRS) while still not having S owe any tax?
Scenario 1
$10,602 scholarships
$8,685 tuition and fees plus $250 books = $8,935
taxable scholarship $1,667
AOTC $0
Scenario 2
$10,602 scholarships
($6,300 - work income) taxable scholarship allocated to room and board
$10,602 - taxable scholarship = scholarship that is allocated to QEE
$8,935 QEE - scholarship allocated to QEE = QEE available to claim for AOTC