Form 1098-T 2004

[Bird Legs]

Working on a 2004 tax return. Client received a 1098-T showing the following info.
Education Related Expenses -0-
Scholarships / Grants $800.00
Less than 1/2 time student.
Client did not work in 2004. Her sister and sisters daughter were seriously injured in
a car accident and she had to stay home and take care of them.
Clients income for 2004 consisted of : State Unemployed $6500.
IRA withddrawal $147. (taxable amount)
Salary $600.
How would the Scholarship/Grant of $800. be reported? or would it?
Realizing it will make very little difference in the tax. But I want to report it
properly.
Thanks

[farm girl]

Probably don't need to worry

about the scholarship/grant money if they did not take an education credit for the expense in the previous year.

Usually the 1098-T, at least in my experience, will have no amount in education expenses and will have an amount in scholarships/grants if the student only went for the spring semester. The college will bill the tuition in December and payment is usually required before the 31st. But the scholarship and grant money doesn't become available or get applied to the account until school starts in January.

So, for instance, there's a $10,000 tuition bill for Spring 2005 and scholarships and grants that equal $8,000. The bill comes for the tuition and is paid in December 2004. The scholarship money is applied to the account in January 2005. The 2004 1098-T shows the $10,000 tuition and the 2005 1098-T shows the $8,000 scholarships. If an education credit was taken for the tuition expense in 2004, then it's possible that the credit needs to be recaptured in 2005.

[Bird Legs]

Farm Girl

Thanks for your response. There were no education credits taken on the prior year return.
There was, however, a deduction on line 26, page 1, of the 1040. This was an adjustment
to income for education expenses.
Therefore, I will go ahead and add back to income the same amount as was deducted.
Even though the grant/scholarship was greater than the deduction.
This is the 2004 return I am working on.
Amount deducted in 2003 was only $269. Grant/Scholarship reported on the 2004 1098-T was $898.

[farm girl]

The question is ...

do we even know the correct amount unless we've seen the actual tuition bills from the school? If we always went by the 1098-T, then I think my assumption is correct. If the person that prepared the prior year return used the actual college statement, the return may be correct as was prepared and the 1098-T should be ignored.

When this credit was first available, the students would get the 1098-T and all the information in the boxes would be blank except for the checkboxes for being enrolled half-time and for graduate student. We had to determine the correct amounts from the tuition statement. Now that the schools are finally putting information in the boxes we just use those numbers - but is it really correct? I only had one new client this year that didn't have a clue as to whether or not they needed to recature the credit - his father had done the return the year before and no one remembered what they did or where they put the 2004 return. It becomes more work than it should.