We received a $10k scholarship but ended up returning a large portion of the scholarship to the foundation. On the 1098-T the payments received are under the $10k reported as a scholarship/grants. How do I report the "return" of the scholarship funds that were given back to the Foundation? Do I need to request a modified 1098-T? At this point, TurboTax treats the $7k+ difference as additional income, but that difference was returned already.
Ideally, you request a corrected 1098-T, but it's not really necessary and the schools usually say no.
The 1098-T is only an 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.
If you claim the tuition credit, you do need to report that you got one or that you qualify for an exception (the TurboTax interview will handle this)
You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. 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. You will also reach a screen that allows you to adjust the scholarship amount for "amounts not awarded for 2021 expenses".
Or if you find it easier, just change the numbers in boxes 1& 5 to what your records show. The 1098-T that you enter in TT is not sent to the IRS.
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