1098T [IRS Form 1098-T, Tuition Statement]

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dmcmahon
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1098T [IRS Form 1098-T, Tuition Statement]

Post by dmcmahon » Mon Apr 23, 2018 4:55 pm

I do my sister's taxes and this year I had to deal with a form I'd never seen before. I'm hoping someone on this forum can help me. She's had to file for an extension while we try to sort this out.

The form is a 1098T, which has something to do with educational expenditures. My sister is a retired teacher and in 2017 she had to take two courses to maintain her certification status so that she can continue to substitute teach.

One institution sent her a 1098T with the amount of tuition she paid shown in box 2 of the form. This is described as follows: "Amounts billed for qualified tuition and related expenses". So, this one seems clear enough and correct.

The other institution listed an amount in box 1 of the form. The amount is much lower than the amount she paid on the invoice for that course. Moreover, that box is described as follows: "Payments received for qualified tuition and related expenses". We went to the school and met with the bursar, who claims that this is the new way of reporting tuition payments, while box 2 is the old way. Yet nothing about this form would lead you to expect that the form is from the perspective of the institution (i.e., that the amount was "received" by the institution, not the taxpayer). In other words, the bursar's claim makes no sense to us.

Are we correct in thinking that this guy is trying to blow smoke here?

mlipps
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Re: 1098T

Post by mlipps » Mon Apr 23, 2018 5:01 pm

No, he's correct about the intent of the form, although it's not a given that the school prepared it correctly.

Is there a chance that she was billed for both courses in 2017, but only paid for one of them in 2017 & paid for the other early this year? That's the likeliest reason that you would have different amounts in boxes 1 and 2.

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dmcmahon
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Re: 1098T

Post by dmcmahon » Mon Apr 23, 2018 5:17 pm

Thanks for your reply. Let me try to clarify. I will call the two educational institutions A and B.

A sent a 1098T with her tuition, which was paid in 2017, clearly listed in box 2. Box 2 clearly reflects an amount paid to A by my sister.

B sent a 1098T with an amount in box 1, then described it in box 5 as a scholarship. There is nothing in box 2. The amount does not match anything on the invoice she paid to B. All payments were made in 2017.

We think B is wrong. B is claiming that box 1 is just an alternate place to report an amount paid by my sister to B. The fact that the amount is lower than what she actually paid is, so B claims, due to only part of the invoice being qualified tuition payments. Whereas we read box 1 as representing an amount received by my sister, not an amount paid. In other words, we believe nothing should appear in box 1, and if a lower deductible tuition amount is correct, it should still appear in box 2. B acknowledges that the amount in box 5 is incorrect.

In other words, our reading of the form is that box 1 is the place where money you (the student) gets is reported, and box 2 is a place where money you (the student) pays is reported. The bursar at B is claiming that either box 1 or 2 is a valid place to report a payment made by a student, despite me reading directly from the form to him. Is he right? I'm not an accountant and don't even play one on TV...

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dmcmahon
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Re: 1098T

Post by dmcmahon » Mon Apr 23, 2018 5:31 pm

Quoting directly from the instructions for filing the form (which I gather are instructions to the educational institution, not the taxpayer receiving the form):

Box 1. Payments Received for Qualified Tuition and Related Expenses
Enter the total amount of payments received for qualified tuition and related expenses from all sources during the calendar year. The amount reported is the total amount of payments received less any reimbursements or refunds made during the calendar year that relate to the payments received for qualified tuition and related expenses during the same calendar year. The amount reported is not reduced by scholarships and grants reported in box 5.


Box 2. Amounts Billed for Qualified Tuition and Related Expenses
If you use this method of reporting, enter the amounts billed during the calendar year for qualified tuition and related expenses. The amount reported is the total amount billed less any reductions in charges made during the calendar year that relate to the amounts billed for qualified tuition and related expenses during the same calendar year. The amount reported is not reduced by scholarships and grants reported in box 5.

This seems to support the bursar's claim, but I'm not sure.

Edit: this from TT seems to indicate that box 1 or 2 are both valid reporting techniques:
https://turbotax.intuit.com/tax-tips/co ... /L3SqH8fg0
So really it’s just the printed prose on the form that’s confusing, and the incorrect info in box 5.

tomd37
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Re: 1098T

Post by tomd37 » Mon Apr 23, 2018 8:26 pm

I think she should be claiming the Lifetime Learning Credit utilizing Form 8863 and she should be claiming as expenses only the amount she actually paid the qualified institution in 2017. That amount should be available from her financial account with the institution. As to box 5 amount that is reserved for any scholarship money she may have received from some source. The scholarship amount received should be subtracted from the actual qualified expenses she incurred and the balance claimed on Form 8863. I find it rather unusual for her to receive scholarship dollars in her situation, but it may be so. You might check with the educational institution to see if there really was scholarship funds received in her name or did they make a mistake of the 1098-T? They are very prone to errors.
Tom D.

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FiveK
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Re: 1098T [IRS Form 1098-T, Tuition Statement]

Post by FiveK » Mon Apr 23, 2018 10:40 pm

dmcmahon wrote:
Mon Apr 23, 2018 4:55 pm
One institution sent her a 1098T with the amount of tuition she paid shown in box 2 of the form. This is described as follows: "Amounts billed for qualified tuition and related expenses". So, this one seems clear enough and correct.
It may indeed have happened that she paid exactly the amount billed and shown in box 2: no more and no less. But from the IRS's perspective, just because the school billed her doesn't mean she paid. That's why the box 2 "method" is somewhat useless and it's good to see it going away.
The other institution listed an amount in box 1 of the form. The amount is much lower than the amount she paid on the invoice for that course. Moreover, that box is described as follows: "Payments received for qualified tuition and related expenses". We went to the school and met with the bursar, who claims that this is the new way of reporting tuition payments, while box 2 is the old way. Yet nothing about this form would lead you to expect that the form is from the perspective of the institution (i.e., that the amount was "received" by the institution, not the taxpayer). In other words, the bursar's claim makes no sense to us.
As you quoted from the instructions, the bursar's explanation is very plausible. Doesn't guarantee it is correct, but it should be.

DIFAR31
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Re: 1098T

Post by DIFAR31 » Mon Apr 23, 2018 10:59 pm

dmcmahon wrote:
Mon Apr 23, 2018 5:17 pm
A sent a 1098T with her tuition, which was paid in 2017, clearly listed in box 2. Box 2 clearly reflects an amount paid to A by my sister.
No. Box 2 shows the "Amounts billed for qualified tuition and related expenses," NOT the amount paid by the student. The amount billed in a tax year and the amount paid in the same tax year are not necessarily the same thing. For example, let's say a student begins taking classes at a school in the spring semester of 2017, gets billed in December 2016 for the upcoming classes and pays the bill in January 2017. A 2016 1098-T would have nothing to put in Box 1 (as nothing was paid in 2016), but it could alternatively have an entry in Box 2 since there was a billed amount in 2016. Until 2018, it was left to the school to determine which reporting method to use (Box 1 or Box 2, but not both).
In other words, our reading of the form is that box 1 is the place where money you (the student) gets is reported, and box 2 is a place where money you (the student) pays is reported.
No. Box 1 does not report money that the student gets. The "payments received" that can be reported in Box 1 are amounts received by the school, not the student. And Box 2 would show an amount billed by the school, not an amount paid by the student.
The bursar at B is claiming that either box 1 or 2 is a valid place to report a payment made by a student, despite me reading directly from the form to him. Is he right? I'm not an accountant and don't even play one on TV...
He's kind of right. Box 1 reports payments made by the student/received by the school, while Box 2 reports amounts billed by the school. Until 2018, schools had the option on a 1098-T to report either the "Payments received for qualified tuition and related expenses" (Box 1) or "Amounts billed for qualified tuition and related expenses" (Box 2). Starting with tax year 2018, schools will only be permitted to use Box 1, hopefully avoiding a lot of confusion.

CRC301
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Re: 1098T [IRS Form 1098-T, Tuition Statement]

Post by CRC301 » Mon Apr 23, 2018 11:01 pm

Be careful with box 2. It does not mean that's the amount you paid that year, it just means it's the amount they billed you that year. Depending on when bills were sent out, you could have paid in a different year than you were billed. We ran into that problem in the past and we got a form CP2000 2 years later. Turns out we had made a payment in a different year than billed so we claimed to much deduction. Had to amend the return and send it in with proper payment.

Turbo tax didn't tell us to send in receipts but I would send in copies of receipts of the payments with the return.

mlipps
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Re: 1098T [IRS Form 1098-T, Tuition Statement]

Post by mlipps » Tue Apr 24, 2018 9:12 am

Lots of helpful info above. However, in terms of filing your sister's taxes, I would say that the 1098 T is meant to be a helpful document for preparing the tax return, but is often not the gospel truth due to the nuances listed above.

I do taxes every year for IRS VITA tax site and we always request the "summary of accounts" in addition to the 1098-T. While I can usually reconstruct why the numbers are what they are on the 1098-T, it doesn't necessarily mean they are what we report. You're welcome to report what was paid to the schools in 2017 that you feel meets the IRS definition of qualified tuition payments, regardless of what the 1098-T says.

Keep in mind that the IRS is subjecting educational credits to additional scrutiny in recent years and you may receive a CP2000 letter this time next year, which will require you to provide additional documentation on how you calculated the amount which deviates from the 1098-T.

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neurosphere
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Re: 1098T [IRS Form 1098-T, Tuition Statement]

Post by neurosphere » Tue Apr 24, 2018 9:22 am

mlipps wrote:
Tue Apr 24, 2018 9:12 am
You're welcome to report what was paid to the schools in 2017 that you feel meets the IRS definition of qualified tuition payments, regardless of what the 1098-T says.
I agree with this. If you have proof that you paid the school in 2017 (and not in 2018 for a bill received in 2017), and you can also show that the amount paid in 2017 was for qualified educational expenses, then you really don't care what's on the 1098-T. These are wrong all the time.

You said she has an invoice. And I assumed she paid by check or credit card, so there is a record of date of payment. It's the payment amount (and date of payment) which is relevant. If the IRS ever asks, that's all you need. Well, in addition to showing the school and the courses were "qualified". :D

tomd37
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Re: 1098T [IRS Form 1098-T, Tuition Statement]

Post by tomd37 » Tue Apr 24, 2018 9:23 am

Totally agree with Mlipps post above. Form 1098-T has a historical record over many years as frequently being incorrect, although improving in more recent years. VITA and TCE tax preparation programs suggest the presentation of and use of supporting "summary of accounts" from the educational institution.
Tom D.

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