Amended Return / Scholarship Income

[Burke]

I have a TT tax return from a DIY client which needs to be amended. He filled out the 1098-T form worksheet with the correct information showing no tuition paid but scholarship income (which properly went to Line 7 showing "SCH" $xxxx) and was added to wages. However, it is for $200 less than the scholarship income. There is a $200 deduction on Line 18 (Form 1040A) for student loan interest. I can't find any information where this should have been an adjustment to the Line 7 addition. Am I missing something?

[appelman]

I don't think you are missing anything.

The student loan deduction shouldn't have anything to do with it. And it certainly can't be in both places! But might there have been some other educational expense netted against the scholarship income? And is this the only reason for amending? If so, I wouldn't bother.

[Burke]

No, its not the reason I am amending. None of the scholarship income should have been taxable, and it was over $10K. Plus he qualified for AOC as well. We are talking almost $4K refund. I just have to account for the $200 discrepancy. I can't see any reason for it, must have been a glitch in the software, because he input the correct figures on the correct worksheets for both.

[appelman]

Anything can happen on a DIY return.

You'd have to know exactly what the guy did. But shouldn't there be tuition expense to offset the scholarship? If not, what was the scholarship used for?

[Burke]

Yes, I have detailed transcript information from the college. Tuition alone (not counting room & board, etc.) was in excess of $15K. Scholarship was $10K+. So, not only was the scholarship not taxable, there was excess tuition expense which qualified TP for AOC due to payments (loans). The only info shown on the 1098T was the scholarship. (I hate those things.) And the TP obviously did not understand how to treat it. The software didn't know any better because it didn't have any other information.

[appelman]

The original sounds like something of a mess.

But you really shouldn't have to worry much about WHY the original return was the way it was. Just get the amended return right, provide a reasonable narrative on the 1040X, and include copies of new or changed forms or schedules.

[FEDUKE404]

Fixing the errors

But you really shouldn't have to worry much about WHY the original return was the way it was. Just get the amended return right, provide a reasonable narrative on the 1040X, and include copies of new or changed forms or schedules.

If the student was a new graduate, it could have been the actual "senior" qualifying expenses were shown on the prior year Form 1098-T.

For the middle years, things would likely work out assuming numbers were equal. Biggest problem might be the first year, which would perhaps show "all" expenses on Form 1098-T and no offsetting scholarship amounts until the year thereafter.

TurboTax can create some real surprises. In so many words, you may wish to at least quickly take a look at returns of any recent years if educational expenses were a factor. And don't forget to deal with whatever treatment the state income tax return allows for education expenses.

FE

[Burke]

If the student was a new graduate, it could have been the actual "senior" qualifying expenses were shown on the prior year Form 1098-T.

For the middle years, things would likely work out assuming numbers were equal. Biggest problem might be the first year, which would perhaps show "all" expenses on Form 1098-T and no offsetting scholarship amounts until the year thereafter.

TurboTax can create some real surprises. In so many words, you may wish to at least quickly take a look at returns of any recent years if educational expenses were a factor. And don't forget to deal with whatever treatment the state income tax return allows for education expenses.FE

That's exactly what happened. The tuition was billed in Nov. 2011 for the Spring 2012 semester and so was on the 2011 1098-T. I have all of them and all the past years' returns. I originally thought he would not qualify for AOC due to the 4-yr rule, but -- luckily -- the first year of college they took the LLC. No other year needs amending.

[Burke]

PS: This happens to be an NC return. Interesting, that they allow an adustment to FAGI for the amount used for the AOC, (up to T&F max of $4K. ) Looks like that has been eliminated for 2013.