1098T box 6 adjustments

[Jesse]

Student filled out the financial aide form for 2007 incorrectly and received Pell grants in excess of what they were entitled to.

In 2008 they had to pay back the $3,000. They received a 1098-T with the $3,000 in box 6. Adjustments to scholarships or grants for a prior year.

Instructions state this amount may affect the amount of any allowable tuition and fees deduction or education credit that you claimed for the prior year. You may have to file an amended income tax return for the prior year.

By this I statement I am thinking I need to amend the tuition deduction taken in 2007? Or can I add it to the tuition paid in 2008?

It would be easier to just add to 2008 tuition but do I have a choice?

[AJsTax]

Jesse

My understanding of this situation is that you would have to amend 2007 if it makes any difference or if the difference is large enough to offset the cost of an amended return. I would look at last year and take out the extra $3000 of grants that should not have reduced the allowable education expense. If that new number of expenses is larger than what was usable last year, then you have a decision to make. With such large expenses for full time college and small amounts that count toward the hope credit or the fees and tuition deduction, there will often be nothing to change. ie: they had $7000 allowable education expenses and you used $4000 as a deduction on the 1040, the extra $3000 would make the allowable expense $11000 and not change, since you can only use $4000.
This is my take on this situation. maybe someone else will have something I did not think of.

[Jesse]

Thanks for the response.

I can't seem to find any guidance on the situation. If we amend we are looking at $750 extra for the tuition deduction in 2007 as income was too high and phased out hope and lifetime.

If we take it for 2008 the outcome would be the same without having to file an amended return, but again, the 1098T instructions for box 6 is all I can seem to find, which states you "may" have to file an amended income tax return for the prior year. I think this is the route I will go.

Thanks again!

[Burke]

It's better for the TP as they will pay interest on the extra refund for a prior year.

[Jesse]

I thought about that as well, but the interest won't be enough to cover my fee, and I'm not doing it for nothing, little maybe, but not nothin'!

Off topic, it seems my largest complainers are the more well off people, maybe that's why they are so well off?

What would you charge for an amendment? I have all the info already entered, and it really won't take that long to complete - for me that is. It's kind of like that mechanic knowing which screw to turn.