Best Practice for entering 1098T expenses when requesting loan forgiveness

Are you a tax preparer?

@Hal_Al 

I don't understand the question.  The 1098T reports tuition payments received by the school.  If the school was paid, it doesn't matter (for the 1098T) whether the payment was by cash or student loan.  Loan forgiveness at some time in the future will not change the fact that the school received a tuition payment. (As far as I know, the Dept of Education does not take tuition back from the school.)

The impact of paying tuition with a loan, getting a credit such as the AOC, and then having the loan forgiven, is that forgiven loans are usually treated as taxable income.  Some, but not all, student loan forgiveness may be tax-free, it depends on the program.  I am not aware that having a loan forgiven after paying tuition would change eligibility for the credit.

If you are asking about making your client look more destitute to qualify for forgiveness, by not claiming the credit, I can't advise you on that.  (If you were asking "Can I omit a W-2 to make my client look broke, get the forgiveness, then file an amended return to add the W-2?" I would certainly think that would be a bad idea.)

Lastly, I am considering the possibility that you are asking about student loan interest on a 1098-E instead of tuition payments on a 1098-T.  The 1098-E should only report interest actually paid.  If your client paid interest, there is no reason not to take the deduction, unless the loan forgiveness will also result in a refund of past interest.  If you expect that interest will be refunded, you could omit the 1098-E and then amend later to add it when you know the final interest amount, or you could claim the deduction now using the 1098-E and then, if there is a later interest refund, report that as a taxable recovery using the tax benefit rule.