1098 T Reporting of scholarship Box 5

Forum|Forum|6 years ago
May 2, 2020
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Nephew finished UG work and graduated in Spring 2019 and received 1098 T form showing Box 5 scholarships, but no paid expenses. Scholarships are significant (> 20K). Expenses for Spring 2019 reported in 2018 1098 T. 2018 1098 T form reports Fall 2018 and Spring 2019 expenses along with Spring and Fall 2018 scholarships. There is a timing difference here that seems to suggest taxable scholarships in 2019.

Looking back to Freshman year of 2015, 1098 T reported Fall 2015 and Spring 2016 expenses along with Fall 2015 scholarships, producing an AOC credit in 2015 return.

Is there a treatment in turbotax to avoid taxation of scholarships in 2019? This is a timing problem relating to 1098 T reporting. Typically over 4 year attendance, nephew's scholarships exceeded expenses by approx $1,000. In each year we reported these differences as taxable income. Unfair to have extreme tax liability for graduating college. This has to be a common occurrence for any gifted student with scholarships/grants greater than semester expenses. Is there a solution.

Hal_Al

Employee

The 1098-T is only any informational document. The numbers on it are not required to be entered onto your tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit or deduction or possibly your student has taxable scholarship income.

You report scholarship income (or claim a tuition credit), based on your own financial records, not the 1098-T. If you know the 1098-T is not accurate, just don't enter it in TurboTax (TT).

That said, yes there Is a treatment in TT to avoid taxation of scholarships in 2019. In the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid (in your case by scholarship). Alternatively, you will also reach a screen that allows you to adjust the scholarship amount for "amounts not awarded for 2019 expenses".

Carl11_2

Employee

- Scholarships and grants are reported as taxable income (initially) in the tax year they are received. It *does* *not* *matter* what tax year that money is *for*. Period.

- Qualified education expenses are reported/claimed in the tax year they are paid. It *does* *not* *matter* what tax year is paid *for*.

After entering the 1098-T followup screens will ask for scholarships and qualified expenses that are "not" included on the 1098-T. So if you actually did pay any qualified expenses in 2019, that's where you will report them and that will offset the taxability of the amount in box 5.

Take special note that if the qualified expenses actually paid in 2019 are *LESS* that the total scholarships/grants received in 2019, then the difference is taxable income *TO THE STUDENT*. Therefore the student *not the parent* will report *ALL* education stuff on the student's own return. However the parents will still claim the student as a dependent *if they qualify*. (If the student graduated in May and went right to work, then more than likely the parents do not qualify to claim the student as a dependent.)