IRS cracking down on blank Box 1 of form 1098-T Education

[AZ-Tax]

New client received CP2000 letter from IRS for TY 2013. 2013 Box 1 of form 1098-T is blank. IRS told me to have my client create a detailed spreadsheet listing all my clients qualified education expenses then totaling them up. TP/Client needs to sign and date spreadsheet. IRS did not say to include copies of receipts, cancelled checks, CC statements etc but would be helpful.

[David1980]

A common refund scheme is to add an 8863 refundable credit to returns that do not really qualify. Often the taxpayer is told it's a "senior citizen rebate" or "stimulus" or whatever. In those cases of course there's no 1098-T at all. I'm kind of surprised they'd go after returns where a 1098-T is present with an amount in box 2. Perhaps an overreaction to the common fraud where no 1098-T exists at all?

[FEDUKE404]

IRS reviewing actual Form 1098-T - - - are you sure?

Do you know if the IRS even looked at the Form 1098-T in question ? ?

(For my 2¢ worth, and based upon prior experience, I cannot envision the IRS "cracking down" on the numbers [not] shown on a Form 1098-T when virtually every Form 1098-T I've encountered in recent years has no entry in qualifying amounts "paid" but only in qualifying amounts "billed.")

**IF** the IRS is now deciding to pursue a non-entry for amounts "paid" then there are going to be many, many unhappy taxpayers in the near future.

Are there perhaps other issues with the client return that attracted the initial IRS attention??

FE

[Burke]

Just sounds like a letter-audit to me on this particular item. Or perhaps the Box 2 is what the TP claimed, which often is not what he actually paid. And did he have a figure in Box 5? Was it subtracted before calculating the 8863 credit? Something looks off or they would not have generated the CP2000.

[Nashville]

Cracking Down? Get Real!!

The title implies that the IRS is cracking down on improper execution of Form 1098-T. If this were true, the IRS would have to "crack down" on the institutes that are improperly reporting form 1098-T. Fat chance. The IRS has a choice -- it can go after these huge institutions, agencies, banks, insurance companies, etc. to make them issue paperwork properly, or it can go after taxpayers who are victimized by this mis-information. Guess who they go after?

If you have experience dealing with an improper issuance of a 1099-MISC, 1099-S, 1095, 1098-T, etc. you know what I'm talking about. You are strictly on your own. Don't expect any help from the IRS. Hate to admit it but I sorta have to agree with the parenthetical comment from the Federal Duke guy for a change...

[mastertaxguy]

1098-T DOCUMENTATION-Account Transcript?

1. In the last two tax 'seasons' we have encouraged, and at times requested, clients obtain an account statement from their college/university/whatever in addition to or in lieu of a 1098-T from the higher education institution. This past tax season, we had two follow up letters from IRS regarding 1098-T's (they wanted copies and other documents) both from one of the private for profit trade schools. We sent (on behalf of the client) the requested forms AND respective account transcripts; eventually taxpayers received their education credit refund. Our pre-season letter for 2016 has added language that we will need any 1098-T AND a college/university/trade school account transcript.
2. The account statement is almost always more informative that 1098-T forms as to amounts actually spent, scholarships, grants, loans, fees and so on. Taxpayers/students can usually get this on line, print them up in the office or elsewhere, and they make a great addition to your e-filing cabinet after you time stamp them/initial them or otherwise note receipt.
3. Comments alluding to fraud with education credits, especially since part of it may be refundable for undergraduates, are well placed. This has been a problem. We are "intimately" aware of several such situations (100+) involving fraudulent 1098-T and refundable tuition claims during the 2013 filing season (2012 tax year) as we took over an office where a preparer was making up 1098-T entries for a number of her 'select' clientele. What has surprised us is that although information regarding that was forwarded to IRS in Washington and to local IRS offices in Detroit (MI) no action was or has been taken against the preparer, who now works independently and, we have been informed, is doing the same thing. We gather the 100+ taxpayers who obtained fraudulent refunds thanks to the preparer (who is on probation for ID theft, misuse of financial transaction devices [debit cards], using taxpayer information to obtain credit cards and such for her own address, etc] is not enough of a dent for IRS to take any action.

[Burke]

What has surprised us is that although information regarding that was forwarded to IRS in Washington and to local IRS offices in Detroit (MI) no action was or has been taken against the preparer, who now works independently and, we have been informed, is doing the same thing. We gather the 100+ taxpayers who obtained fraudulent refunds thanks to the preparer (who is on probation for ID theft, misuse of financial transaction devices [debit cards], using taxpayer information to obtain credit cards and such for her own address, etc] is not enough of a dent for IRS to take any action.

Good grief. The IRS has a fraud division, does it not? But I guess they have their hands full...... What about TIGTA?

[taxmom34]

New client received CP2000 letter from IRS for TY 2013. 2013 Box 1 of form 1098-T is blank. IRS told me to have my client create a detailed spreadsheet listing all my clients qualified education expenses then totaling them up. TP/Client needs to sign and date spreadsheet. IRS did not say to include copies of receipts, cancelled checks, CC statements etc but would be helpful.

I don't think IRS is sending CP2000 because box 1 was blank. but something on his return got the attention of IRS computer, maybe the amount client claimed he paid (excessive?).

[Burke]

And keep in mind, it was the IRS who acquiesced to the educational institutions when they caused an uproar over completing Box 1, and said they didn't have to. After years of us asking for the info, many are now completing the box. But I still ask for a transcript unless one is provided on the form (some do that, too.)

[FEDUKE404]

Complete information on Form 1098-T

And keep in mind, it was the IRS who acquiesced to the educational institutions when they caused an uproar over completing Box 1, and said they didn't have to. After years of us asking for the info, many are now completing the box. But I still ask for a transcript unless one is provided on the form (some do that, too.)

Fortunately, my current exposure to Forms 1098-T is somewhat limited, but through calendar year 2014 documents received I have yet to encounter any institutional entry in Box 1 of Form 1098-T. Perhaps I need to start humming that famous song from "Annie" ??

I have seen, on rare occurrences, additional student documentation showing details of payments made, and then I need to work through the qualifying/non-qualifying entries there.

FE

[nwtaxlady]

I have always requested an Account Summary by Term in addition to the 1098-T

In order to complete the 8863 form Accurately, you need more than just the 1098-T. If that is all you are going by, then you are doing these incorrectly. I always ask for an Account Summary By Term, or another documentation from the College website that shows what was paid, dates paid and by whom it was paid by. These additional documentations provide a lot of information! A lot of times the tuition is paid by third party! Such as Employer, or GI Bill, or by money from a 529 Plan.

You need to KNOW where the money is coming from. If the student has his/her education paid by GI Bill, then they don't get the credit. Not only that but most often, they have grants/scholarships coming in that are then taxable!

One that really gets me.... is when Grandma who lives in WA has a 529 plan for grandson in CA. AND Grandma wants to maintain ownership (because she wants CONTROL of the money) of the 529 plan. And so every term takes money out of the 529 and sends Grandson a check. Then Grandson gets his taxes done in CA and NO WHERE is that money from the 529 plan that Grandma sent him is taken into consideration for Grandson's tuition credit. The 1099-Q comes to Grandma because she is the owner (with Grandson named as beneficiary). This is a Loop Hole! There are many situations just like this out there and the Tax Preparers don't realize it!