1098-T Discrepancies?

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rayout
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1098-T Discrepancies?

Post by rayout »

I am assisting a family member with their income taxes for the first time this year. Tuition for each of his children is ~$20K per year. I understand he has paid ~$10K for each of his two children for college this year. Only ~10K was reported as qualified education expenses in the 1098 T. The 1098 T shows ~$11K in grants and scholarships for each child. When I enter this into TaxAct, it shows that he does not qualify for any deductions for these expenses.

I don't understand how he could spend $10K or child and yet not qualify for any deductions? Should the qualified education expenses really be $20K for reach child? If so this impacts at least three years of his past returns. His accountant also missed the Saver's Tax Credit on his last year's return...
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Tycoon
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Re: 1098-T Discrepancies?

Post by Tycoon »

Did you mark the box that states the child can be claimed as a dependent on another form? This may have something to do with it.
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livesoft
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Re: 1098-T Discrepancies?

Post by livesoft »

When you write "this year" I take that to mean 2015, so none of that is used for last year's tax return.

There are many different kinds of education credits, so see Pub 970. If tuition is $20K per year and he paid only $10K in tuition last year and got $11K in tuition credits, then he didn't pay any tuition. He may have paid room and board, but most tax breaks do not apply to room and board. Also make sure that he didn't pay tuition for the winter/spring semester 2015 in 2014. There are rules about that, too.

If you read Publication 970, there are things in that in the fine print that the tax programs do not make clear.

Furthermore, if one's AGI is too high, then no tax breaks except no taxes on gains in 529 withdrawals.
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Topic Author
rayout
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Re: 1098-T Discrepancies?

Post by rayout »

livesoft wrote:When you write "this year" I take that to mean 2015, so none of that is used for last year's tax return.

There are many different kinds of education credits, so see Pub 970. If tuition is $20K per year and he paid only $10K in tuition last year and got $11K in tuition credits, then he didn't pay any tuition. He may have paid room and board, but most tax breaks do not apply to room and board. Also make sure that he didn't pay tuition for the winter/spring semester 2015 in 2014. There are rules about that, too.

If you read Publication 970, there are things in that in the fine print that the tax programs do not make clear.

Furthermore, if one's AGI is too high, then no tax breaks except no taxes on gains in 529 withdrawals.
All tuition payments/grants/scholarships referenced are for tax year 2014. Specifically the 1098 T listed 10K in qualified education expenses so I believe that should all be "deductible". I am just not sure how the 11K in credits overrides the $10k he paid out of pocket.

His AGI is $40k, so he should qualify for everything.
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rayout
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Re: 1098-T Discrepancies?

Post by rayout »

Tycoon wrote:Did you mark the box that states the child can be claimed as a dependent on another form? This may have something to do with it.
TaxAct indicated the issues was that the total qualified education expenses was 0 since the grants/scholarships exceeded the qualified education expenses.

My thought is that the "qualified education expenses" should be $21K and might be improperly reported. I've read that the 1098 T forms are notoriously ambiguous but wanted to confirm with others with experience with this topic before I raise a ruckus.
livesoft
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Re: 1098-T Discrepancies?

Post by livesoft »

rayout wrote:All tuition payments/grants/scholarships referenced are for tax year 2014. Specifically the 1098 T listed 10K in qualified education expenses so I believe that should all be "deductible". I am just not sure how the 11K in credits overrides the $10k he paid out of pocket.

His AGI is $40k, so he should qualify for everything.
Boxes 1 and 2 of our 1098-Ts are labelled: "… for qualified tuition and related expenses." (My bold, my underline.) So one cannot use the number there to know what the qualified higher education expenses that get a credit are.

Box 8: Whatever is in box 8 has to be subtracted from what is in Box 2 (or 1). If scholarships and grants are for tuition, then I can see why no credits.

For another child, the 1098-T has not only tuition, but room&board and fees in Box 2. The latter expenses are way more than tuition.
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mptness
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Re: 1098-T Discrepancies?

Post by mptness »

Keep in mind that box 1 is for amounts paid, and box 2 is for amounts billed. Many schools are permitted to report qualified expenses in box 2 as amounts billed. This means you must examine your school's record to see when the amounts were actually paid. For example, often the spring semester is billed in the fall, but not actually paid until January (which makes it an expense for the following year.

If your 1098t reports expenses in box 2 you cannot simply subtract the grants in box 8. In this case the form does not give all the info you need.
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