Box 1 of the 1098-T is for paymentsreceived “from any source” forqualified tuition and related expenses. This is the information I need. However in the years that this form has beenin use I have only seen an entry in this box once – and it was incorrect. It showed only the payments received directlyfrom the student (actually the student’s parents).
Box 2 is for amounts billed for qualified tuition and relatedexpenses. This is the box that is alwaysfilled in. To be honest, I don’t care arat’s hind quarters how much was “billed”. My clients are cash-basis taxpayers – I need to know what was paidduring the calendar year, not what was billed.
Colleges will generally billstudents for the semester beginning in January of the following year at the endof the current year. So the amount inBox 2 usually includes this amount. Butparents or students do not always pay this amount until the following year.
In my instructions to clients I askfor not only the Form 1098-T, but also “all the ‘Bursar’sReports’ for the year”. Often a student can access his/her financialaccount history online, and I ask parents to provide me with a print-out ofthis report.
Thankfully some colleges and universitieswill provide a supplement to the Form 1098-T mailing that itemizes the variouscharges and payments made for the year by date, which is extremelyhelpful. But unfortunately not all.
This past tax season I received aForm 1098-T for a student who had graduated in 2011. Box 1 and Box 2 were both empty, but therewas an amount for scholarships and grants in Box 5. Upon questioning the taxpayer I discoveredthat there were indeed payments made for qualified tuition and fees in calendaryear 2011. These payments had beenbilled in 2010, and were included in Box 2 of the 2010 Form 1098-T.
I further learned that the studentdid not receive any scholarships or grants from anyone in 2010 or 2011. The amount reported by the school in Box 5was a payment for tuition and fees made via a student loan. The school really FU-ed – the amount reportedin Box 5 should have been reported in Box 1! As a result I was able to claim one of the tuition tax benefits. If I had relied on the Form 1098-T I wouldhave claimed nothing.
If the IRS is going to have a Form1098-T with a Box 1 asking for payments made from all sources for the calendaryear then it should require educational institutions issuing the form to includean entry in Box 1. Why have this box onthe form if it is not required to be used? And, based on the above experience, perhaps the schools should berequired to identify the amounts reported in Box 5 by source somewhere on thereturn.
Of course I do believe that thereshould be no tuition tax benefits onthe Form 1040. These benefits should bedistributed as direct student financial aid and administered via the FAFSA.
Thank you for allowing me torant. Do other tax preparers feel as Ido about the Form 1098-T?
TTFN
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