erroneous 1098-T?

[tacks]

I have a client who has an erroneous 1098-T. Meaning that it fails to show any of the payments made for tuition. (She showed me receipts form the college proving that payments were made.)

How would you handle this?

Just file the return, take the education credit and ignore the fact that there's a flag?

Or advise the client to have the College issue a corrected 1098?

Or what about filing a 1040 with an attachment stating the 1098-T issued is incorrect. And the correct amount is $XXXX?

[AZ-Tax]

Erroneous 1098-T

If you can get the College to issue you a corrected copy or correct it on their website so the taxpayer can print it off in a expedited manner, go for it. Other then that you may want to file the corrected amts and explain in an attachment.

[tacks]

Other then that you may want to file the corrected amts and explain in an attachment.

Thanks AZ,

That's exactly what i did.

[Nashville]

Good Luck

Tacky, as AZ has told you "Good Luck."

The 1099-T is the most widely erroneous document in the world of information returns. If you have one that you simply can't use (and this is often the case), then you have no choice but to use the client's own records.

You will note on the face of it that it is for "expenses billed to the student." This is typically for the calendar year and not for the school year as required by the IRS. It also never states whether the billings were actually paid, or when they were paid. The amounts are also in error, even for what they purport to be, and rarely include all the eligible expenses. Also includes expenses that are ineligible.

I usually use a 1098-T carte blanc, to keep from embroiling my clients in a mass reconciliation. But if I find one (as you have) that I can't use, then I have no choice but to turn to my clients for the information.

[RitaB]

You got that right!

The 1099-T is the most widely erroneous document in the world of information returns.

You also have to ask if they received any tax-free assistance, like scholarships, grants, G I Bill... I imagine a lot of folks are getting education credits for expenses they didn't pay. I don't care about timing of payments discrepancies, but I really do care if a person goes to school tuition-free, then gets a tax credit to boot.

[tacks]

First off thanks to Nash and RC for replying. I can not stress to you how valuable this kind of feedback has been at times.

Tacky, as AZ has told you "Good Luck."

LOL! Actually, the alias i'm using is 'tacks' not 'tacky.' No biggie.

You will note on the face of it that it is for "expenses billed to the student." [EDIT] ....It also never states whether the billings were actually paid, or when they were paid.

Actually line 1 of the 1098-T reads 'Payments received for qualified tuition and related....' Hence that was my problem. The 1098 indicated that my client paid NOTHING and was therefore entitled to NOTHING.

Again, thanks all the same.

[AJsTax]

None of the 1098-T

are showing anything in the first box, only in the second that states amounts billed to the student. Wait, I did have one out of probably over two hundred that I saw this tax year. That is standard procedure now. The accounting work is much less for the school to show the amounts billed and then in (I think) box 5 the scholarships and grants received. One school in this area actually started listing the account history on the bottom of the form. That was so nice, but only one out of so many.
We very seldom have to get more information from the client to use the 1098-T and when we do it is VERY SELDOM wrong. You can use the amounts listed for the next spring semester if the fees were paid by check or loan before the end of the year, which is the case 99% of the time.

[David1980]

Actually line 1 of the 1098-T reads 'Payments received for qualified tuition and related....' Hence that was my problem. The 1098 indicated that my client paid NOTHING and was therefore entitled to NOTHING.

Again, thanks all the same.

Even a correct 1098-T may have nothing in box 1. The school has the option of reporting box 1 or box 2, but is not required (I don't believe even allowed) to report both.

Not that correct 1098-T's are very common. You would think a form coming from qualified educational institutions of higher learning could figure out how to fill out a simple form, but no, they really can't.

[tacks]

Thanks AJ,

I was not aware. And I wish that i had posted up this question sometime ago.

(It really is misleading, isn't it! For someone who doesn't see all that many 1098-Ts!)


EDIT: Thanks to David, also.

ETAA: Apparently i'm going to have to go back and revisit this subject to verify that i handled it correctly and didn't miss anything.

[FEDUKE404]

Mass confusion is common with Form 1098-T

Even a correct 1098-T may have nothing in box 1. The school has the option of reporting box 1 or box 2, but is not required (I don't believe even allowed) to report both.

Not that correct 1098-T's are very common. You would think a form coming from qualified educational institutions of higher learning could figure out how to fill out a simple form, but no, they really can't.

Having personal knowledge (two in college) of the problems with Form 1098-T, I agree.

The "norm" seems to be to report amounts billed, with the "paid" amount blank.

As for scholarships/reimbursements, etc one college administrator explained to me that they reported that amount, with zero wiggle room, for amounts the college received between 01/01/20xx and 12/31/20xx. The qualified expenses entry can include "more" than a 12-month period.

As an example, a current college freshman could have qualified expenses that would include fall of 2008 semester and spring of 2009 semester. Student could have received a large scholarship, but the funds did not clear until 01/10/2009. Their 2008 Form 1098-T would then show "expenses" for two semesters but with zero reimbursements. (And then if the student dummied up, grades went down, and received no further scholarships the 2009 Form 1098-T would show the previous scholarship amount!)

Sadly, the only way to figure out things for an accurate tax return is to have ALL of the relevant information on hand. The Form 1098-T is basically for illustrative purposes only. In most cases it is at least possible to determine where the numbers on the Form 1098-T came from.

And the other problem I have is the general confusion with clients between "loans" vs "scholarships/grants."

FE