GI Bill and Form 1098-T reporting

[FEDUKE404]

In response to some recent posts regarding our dear friend Form 1098-T, and the reporting of GI Bill / veterans benefits on same, I decided to do a bit of independent research.

Earlier this week I contacted someone at a local university who deals with Form 1098-T matters. Aside from our already having to deal with the "billed" vs "paid" matters for educational tax credits, I was informed that GI Bill funds received by the university would NOT appear in any way, shape, or form on their Forms 1098-T. ("...because it is not a scholarship it is a federal benefit and does not qualify...")

Is this news only to me? Fortunately I do not yet (but will in 2015) have clients receiving GI bill benefits. I can foresee the potential for many erroneous education tax credits, with any eventual "correction" likely to be painful for the clients involved.

So what, if any, documentation does get reported to the recipient of the GI bill? It's my understanding that it is common for the qualifying military person to receive non-taxable housing/living allowances in addition to separate reimbursement of various college fees which "must" be first assigned to qualifying education expenses. Along a similar route, is it possible the education part of the payment could be "too much" (or maybe the student ALSO receives a scholarship!) and then the concept of taxable income enters??

Input from anyone who has routinely dealt with GI Bill benefits would be appreciated in order to clear up this fog. FWIW, this is somewhat related to an issue raised by nwtaxlady in a recent post, where she mentions a student who is getting 529 plan funds to pay for college, but like the issues I've raised above those "numbers" never show up on any Form 1098-T.

There's GOT to be a better way to do things. . . .

FE

[Lion]

Form 1098-T has very little of what I need to prepare tax returns, except for the more than 1/2 time student designation. Use a transcript. That will include dates, dollar amounts, sources, etc.

[taxea]

Uncle Sam will issue a 1099 to the TP for the amount of his/her education which is taxable. Since Uncle Sam pays for the education how would the TP be able to get a credit? S/he didn't pay for the education.

[FEDUKE404]

GI Bill issues

Form 1098-T has very little of what I need to prepare tax returns, except for the more than 1/2 time student designation. Use a transcript. That will include dates, dollar amounts, sources, etc.

Granted. EVERYONE here has agreed many times over that the Form 1098-T is virtually useless.

Thus, my new question was specifically related to the apparent exclusion from the Form 1098-T of any GI bill payments the college received. It caught ME by surprise that such payments never, by design, show up in Box 5 of the Form 1098-T.

FE

[FEDUKE404]

Uncle Sam solves it all ??

Uncle Sam will issue a 1099 to the TP for the amount of his/her education which is taxable. Since Uncle Sam pays for the education how would the TP be able to get a credit? S/he didn't pay for the education.

Your first comment: Is your statement based on speculation or personal experience? How does Uncle Sam "know" what amount is/is not taxable and what calendar year should appear on the Form 1099? What happens if Uncle Sam makes payments only for qualifying expenses in the first place or the student perhaps receives a separate small grant?

Your second comment: If a student/student's parents crank out a tax return using Turbotax, or don't mention (get asked?) about GI Bill payments while using a tax professional, it would be quite easy for the student to claim an inappropriate tax credit armed with only a Form 1098-T that has no mention of any GI Bill benefits on its face.

Yes, hopefully most of us here are already aware you cannot claim education credits for qualifying expenses that were paid by outside sources. That was not really my question in the first place. . ..

FE