Education Credits and 1098T

[photoman]

I noticed the other post regarding 1098t. This is my first time for trying to use the Education Credit. I have an 18 year old student that has W-2 wages of 5700. She received a 1098t which has 4736 in box 1 and 8684 in box 5. I am doing both hers and parents returns. She lives on campus. She wants to claim herself on her return. I ask the parents were there any qualified expenses that any of them paid. The answer was no. Just the 1098t. Would I be correct that unless they paid something out of pocket or there are some loans that paid qualified expenses there would be no reason to put anything on the tax return. In other words would they need to report the information on the 1098t on the tax return if no expenses were paid out of pocket. Say if they come up with 4000 in loans then would I need to include the 1098t information.

[jimmcg]

I noticed the other post regarding 1098t. This is my first time for trying to use the Education Credit. I have an 18 year old student that has W-2 wages of 5700. She received a 1098t which has 4736 in box 1 and 8684 in box 5. I am doing both hers and parents returns. She lives on campus. She wants to claim herself on her return. I ask the parents were there any qualified expenses that any of them paid. The answer was no. Just the 1098t. Would I be correct that unless they paid something out of pocket or there are some loans that paid qualified expenses there would be no reason to put anything on the tax return. In other words would they need to report the information on the 1098t on the tax return if no expenses were paid out of pocket. Say if they come up with 4000 in loans then would I need to include the 1098t information.

Generally the 1098T is useless except maybe to indicate the individual in question was a full time student. It is what is paid (either out of pocket or in the form of qualified loan) for qualified higher educational expenses that counts. It is up to you to determine this amount from client records.

[dtlee]

I don't think this is a straightforward question to answer.

You might also need to take a good long look at Publication 970 and Publication 501.

A child can't decide to "claim herself" unless allowed by law (neither can the parents). She would have to prove that she provided more than half of her own support or missed some of the other qualifying child tests to not be "able to be claimed" as a dependent. Where was her primary residence? Who paid for her lodging expenses there? Where I live no one could support themselves more than 50% on $5700 wages plus $4000 in loans, but that is not totally impossible in other places. There is a provision for the credits to allow a child to claim the education credits (but not the refundable portion of the American Opportunity Credit) if the parents decide to leave her off their return as a dependent (even though eligible to claim her).

In my mind, you need to work out where the money came from and what it was used for in order to determine which education benefits it can apply to. From what you are describing, it looks like she received a full scholarship, possibly including room and board. If so, and if she is not living with her parents any more and truly on her own, she might be able to claim herself, In general, a campus residence is not considered a permanent home except maybe for professors and other educators housed on campus. You thus need to determine where she lived and how she paid for it when the semesters were over. Establishing that is critical to your determining what is the correct way to file not only for federal tax purposes, but for establishing residence for state purposes. She may be entitled to use the American Opportunity Credit for any materials needed for school not covered by the scholarship.

There is really too much here for a simple answer on a forum. I hope this helps.

[Gretel]

yes, all good information. In addition, it is possible that she has taxable income from the part of scholarships and grants that is not used for qualifying expenses.

[taxmom34]

without any info on scholarships here . i would guess that her w2 income of 5700 would be her standard deduction and if she were to be claimed on parents return she would still owe no tax and get all withholding refunded, and education credit would be lost. then , parents claiming her would get her exemption and the eduction credit.

[arlo]

My Question

Where did the $3948.00 of Scholarship funds go to. I thought if the scholarship funds
were not used they would be taxable.

[taxmom34]

to add here, also, scholarship money is considered to be used first ins't it

[taxmom34]

put some thought into it

and if child only earned 5700 and she claims herself she has no benefit from the 1098T. no tax liability. you need to go back and get more detail on what amounts were spent, loans are considered same as cash. i never take amounts on 1098T as gospel, with some digging client can find more than is reported on those forms. some colleges give out a very detailed account of all expenses and how paid, wish they all did

[luke]

I agree

Generally the 1098T is useless except maybe to indicate the individual in question was a full time student. It is what is paid (either out of pocket or in the form of qualified loan) for qualified higher educational expenses that counts. It is up to you to determine this amount from client records.

except that it is up to THE CLIENT to provide this amount (not for US to determine) - (probably the same thing that jimmcg said?)

[S T]

1098T Worthless document

Had one today 1098T showing Box 1 payments -0-, and Box 2 billed amounts as $5500
obtained student loan print outs and they dispersed $ 12,000 during 2009 for 2009 Spring, Summer Fall and Winter Sessions.

Sandy

[S T]

Just had 2 more

I just have encountered two more of these - One family - 3 returns counting the dependents returns.
T/p just doesn't get it - - they only know that they either paid fees or obtained financial aid, and do not understand that not all of amounts are deductible. Hello - I am looking for the tuition and Reg Fees Qualified, maybe a few other items.
I have spent countless minutes and hours trying to feed the information on where to obtain the information from the college or educational facility.
To those that need it, I was informed today, some of the information the Ed Facility does not have, the info might be able to obtained at
www.1098t.com --------- of course you need signons and passwords
but today I received more info than I have in the last 3 days

talk about a lot of emails and frustration

Hope this helps someone else

Sandy

[FEDUKE404]

Kudos to Sandy

Sandy - I applaud your diligence. But I also think you are going to get ulcers trying to make "sense" out of Forms 1098-T without having more information.

Speaking from experience, including that of my own family, I know how essentially useless the Form 1098-T is. Several of my clients have also had to deal with trying to get "just the facts" to figure out the various tax benefits. (I would avoid using "deduction" however.)

I have found that the best route is to ask the student (or parent, if they have access) to get a printout of the student account. Most schools have such, by semester, available online. Trying to reach a human being in the school finance/bursar/whatever office can be a problem, and then you/parent may also encounter privacy roadblocks.

I know the "state" schools in NC have basically the same online format. For the current tax year I would ask for a printout of fall 2009, spring 2010, fall 2010, and spring 2011. A few mouse clicks by someone, and perhaps four sheets of paper, and I'm ready to go.

Added benefit: Once you "see" the expenses listed, you can often reconcile what the school used to come up with the [i]qualifying[i/] ones as shown on the Form 1098-T. (I had one NC school, in the "western" part of the state, that treated the exact same expenses as "qualified" one year and then "non-qualified" the following year!) The printouts will also let you see what, if any, scholarship/loan payments were received.

This process works well, and in general I just keep the tax file in limbo until I have some useful material to work with.

Oh well - time to get back to work. I enjoy your posts!

FE