Education Credits Data

[S T]

Most of us on the Board have complained about the 1098T -
I found this article interesting - as there were approx 11 recommendations by TIGTA to reduce the "erroneous Education Tax Credits"

Wonder if one of those recommendations was a more valid 1098T reporting by the Dept of Education???

http://accounting.smartpros.com/x72911.xml

Sandy

[Koss]

Form 1098-T

I am currently representing a client in a correspondence examination, where the IRS denied the education credits. The IRS notice claims that the credits were disallowed because the IRS did not receive Form 1098-T from any eligible institution. The taxpayer claimed the credit for himself and for his spouse.

I prepared the return, and my file has copies of Form 1098-T for both the taxpayer and the spouse.

Just for fun, I used IRS e-services to obtain a transcript of 1098-T information returns filed for the year in question, for the taxpayer and the spouse. Both forms were there. This shows that the institution did in fact file the forms with the IRS.

So it isn't just the institutions that are screwing up these forms. It is certainly possible that the case I am working on is an isolated incident. But I consider that unlikely. Somehow, my client got tagged with a CP2000 even though the 1098-T forms were in fact filed. There is clearly a process failure somewhere within the IRS.

With my written response to the CP2000, I enclosed copies of the IRS transcripts of the Forms 1098-T. I purposely did not enclose copies of the 1098-T forms. The transcripts should be sufficient to support the credit on the tax return. And the transcripts demonstrate that the IRS had access to the information all along.

In my letter to the IRS, I wrote:

A review of IRS records reveals that the institution did indeed file Form 1098-T for the taxpayer and spouse. Copies of IRS transcripts of these forms are enclosed herewith.

I expect the IRS to accept the transcripts, and the response will be probably be a standard, automated closing letter. But it will sure get interesting if the IRS requests copies of the Forms 1098-T. I will probably object, and escalate the issue, as a matter of principle. The taxpayer should not have to produce copies of a form the IRS already has.

BMK

[S T]

And Then

Thanks Burton for sharing your experience, and I am hoping that you will also continue to update on this incident that you are experiencing.

As so many of us have noted - amounts reported on the 1098T form are not always necessarily correct.

I am thinking that the Educational Institutitions - should report based on what was actually paid - not billed - scholarships are a needed componet - then we also have the issue of Parent Loans versus Student Loans.

the 1098 T reporting should have the same standards as the 1099 INT - 1099-B, 1098 Mortage Interest, etc. Yes it is up to the Taxpayer to also provide adequate records, but the 1098 T reporting seems to have NO Standards -- and now we as professionals will be placed in justifying our position for tax deductions on the Taxpayer's return - and IRS does not either have or recognize - or they are just overlooking.

Sandy

[FEDUKE404]

Play it again, Sam

I hope you did not just hang your tax hat on what was shown on the Form 1098-T......

You also need to be careful if there was perhaps a cross-year (facts versus tax document) issue occurring. This would include "billed" in tax year X, and reported on year tax year X 1098-T, but client actually paid expenses in tax year Y.

However, this scenario just further reaffirms how totally confused the IRS and institutions can be regarding that essentially worthless document.

FE