1098T tuition paid in privious year

[dhawkcpa]

Kid graduates in May of 2011. The 2011 1098T shows no tuition paid or billed and 7K in scholarships. The 2011 tuition of 16K was paid in December 2010 as the school requested and showed up on the 2010 1098T. I have a bad feeling here. Can client take the AOL for 2011 or did he pay the school two weeks too soon? Thanks.

[Burke]

He may be out of luck.

[FEDUKE404]

Follow the money

Ignore the Form 1098-T.

Based upon the facts presented, there WAS tuition paid during 2010. That amount, reduced by any scholarships for the same calendar year, would be your starting point for figuring any tax credits for 2010.

Remember you may have a similar issue for what happened at the end of 2009/start of 2010, and earlier years! **IF** the scholarship was constant, then there may have been an error when the student was a freshman (all tuition, some/no scholarship reported on Form 1098-T).

There is no such thing as paying "too soon" so long as the actual facts are correct.

Of course, it does appear (in theory!) the kid has NO qualifying expenses for 2011 but some scholarship income. That could make for an interesting scenario if the IRS starts sniffing around.

FE

[New York Enrolled Agent]

Kid graduates in May of 2011. The 2011 1098T shows no tuition paid or billed and 7K in scholarships. The 2011 tuition of 16K was paid in December 2010 as the school requested and showed up on the 2010 1098T. I have a bad feeling here. Can client take the AOL for 2011 or did he pay the school two weeks too soon? Thanks.

If I understand the post correctly, perhaps the special rule in §25A(g)(4) might be useful.

(4) Treatment of certain prepayments
If qualified tuition and related expenses are paid by the taxpayer during a taxable year for an academic period which begins during the first 3 months following such taxable year, such academic period shall be treated for purposes of this section as beginning during such taxable year.

[FEDUKE404]

Timing is of importance

If I understand the post correctly, perhaps the special rule in §25A(g)(4) might be useful.

(4) Treatment of certain prepayments
If qualified tuition and related expenses are paid by the taxpayer during a taxable year for an academic period which begins during the first 3 months following such taxable year, such academic period shall be treated for purposes of this section as beginning during such taxable year.

That merely means you are allowed to consider certain "next year" payments as valid expenses for the relevant tax year education credits.

If the "2011" amounts were indeed paid as cited by dhawk during calendar year 2010, there is no way such payments can be used for a 2011 tax credit. Those payments can only be relevant for determining any education tax credits for 2010.

FE