Tuition statement errs and scholarship problem

[charis]

We have grant/scholarship issue that spans two 1098T forms - 2016 and 2017.  For tax year 2016, we received a tuition statement that reflects tuition (8K) billed in August 2016 and January 2017 but no payments (which is inaccurate since we pre-paid 4K for the fall) or scholarships received. 

For tax year 2017, we just received a 1098T form reflecting a (8K) scholarship which was received in the spring of 2017, which covered tuition for the entire 2016-2017 year (hence 8K tuition = 8K scholarship) and 2k tuition billed.

So no matter how I try to enter this form into the TaxAct software, it looks like we have 6K in taxable scholarship income in 2017.  All of the money went directly to the school to cover only tuition so none of it should be taxable. 

I am on the verge of leaving the 1098T off our tax return and dealing with the IRS letter later.  Unfortunately, we paid an extra amount in fees, which would otherwise be deductible, so we'd lose out on that.

[MDM]

The 1098-T form can be more confusing than helpful.  What were the exact numbers and checkmark statuses for each of boxes 1-10 in the two years?

[charis]

2016: (2) 8K; (7-9) checked.  All other boxes 0 or unchecked.

2017: (2) 2K; (5) 8K ; (7-9) checked.  All other boxes 0 or unchecked.

In 2016, the (2) 8K was tuition and fees billed for the 2016-2017 school year.  We pre-paid 4K in Aug. 2016, which was later mostly reimbursed by the school in spring 2017.

In 2017, the (2) 2K is tuition and fees for the 2017-2018 school year .  The (5) 8K is grant money awarded for the 2016-2017 school year, which was dispersed directly to the school in April or May 2017. 

I think I found a way to deal with the issue by notating further along in the tax return that all of the grant money was used for qualified expenses in 2017 and therefore not taxable.  But it doesn't really clear up the confusion.

[BigRed]

During the 7 tax years my wife was in school, I used the 1098-T as a guide, but always cross-checked it with actual statements from the university and calculated myself the appropriate amounts for scholarship taxable income.  I used TaxAct also, and there are places to enter in adjustments to either qualified educational expenses or to scholarship income.  You are not required to simply enter the 1098-T numbers unaltered.

[MDM]

2016: (2) 8K; (7-9) checked.  All other boxes 0 or unchecked.

2017: (2) 2K; (5) 8K ; (7-9) checked.  All other boxes 0 or unchecked.

In 2016, the (2) 8K was tuition and fees billed for the 2016-2017 school year.  We pre-paid 4K in Aug. 2016, which was later mostly reimbursed by the school in spring 2017.

In 2017, the (2) 2K is tuition and fees for the 2017-2018 school year .  The (5) 8K is grant money awarded for the 2016-2017 school year, which was dispersed directly to the school in April or May 2017. 

I think I found a way to deal with the issue by notating further along in the tax return that all of the grant money was used for qualified expenses in 2017 and therefore not taxable.  But it doesn't really clear up the confusion.

The school is using a less helpful version of 1098-T: listing amounts billed (Box 2), not amounts paid (Box 1).  See Understanding Your Forms: 1098-T, Tuition Statement for more.

Appears you are probably dealing correctly with the issue.  Getting Form 8863 or 8917, depending on what you are filing for, is the important issue.

[charis]

During the 7 tax years my wife was in school, I used the 1098-T as a guide, but always cross-checked it with actual statements from the university and calculated myself the appropriate amounts for scholarship taxable income.  I used TaxAct also, and there are places to enter in adjustments to either qualified educational expenses or to scholarship income.  You are not required to simply enter the 1098-T numbers unaltered.

I do know that you can adjust the numbers, but the questions in the software don't truly correspond to the particular issue at hand, so it threw me.

The school is using a less helpful version of 1098-T: listing amounts billed (Box 2), not amounts paid (Box 1).  See Understanding Your Forms: 1098-T, Tuition Statement for more.

Appears you are probably dealing correctly with the issue.  Getting Form 8863 or 8917, depending on what you are filing for, is the important issue.

Thanks for weighing in!