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Tuition/scholarships billed but not paid & taxes


Nancy in NH
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Hi all,

 

I've been reading through all the tax threads as well as IRS code and tax help sites.  I think I have a handle on this, but the CPA we hired does not seem to.  I just want to run this by you all, to make sure I've got this right.

DS attended a university for the fall term and has since transferred to a local CC.  The 1098-T from the univ reported what was billed, not paid.  I realize this is common practice.  I supplied our CPA with a copy of DS's student account in addition to the 1098-T, clearly showing what applied to the fall semester.  We never paid tuition to that univ for the spring (it was not due until 1/4), so scholarships and tuition were subsequently backed out of his account, as expected, but since the univ reports what was billed (in December), the spring portion is included on the 1098-T.  CPA is trying to convince us to report what is on the 1098-T, in order to get the most out of the AOTC credit, because in his words, "The IRS matches up what's reported with the 1098-T."  The guy seems clueless about the education tax law, and hasn't been able to satisfactorily answer any of my questions.  His last email said, "I have never seen a corrected 1098-T in the past.  I've been doing taxes for 20 years and have never had any issues.  What do you think?"  Ummm.  I'm paying you to think and get it right was my thought.

So, am I correct in understanding that if the 1098-T is including payments/scholarships for a semester that never happened that we must adjust the amount we are reporting to account for this when claiming the AOTC credit?

 

Nancy in NH

 

 

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The CPA is going for "what you can get away with" given the 1098T, rather than what you paid. I would be concerned about other places where he might be doing "creative accounting."

 

The AOTC gets maxed out after 4000 of allowable expenses, so depending on what you actually paid the two schools, the extra amount may not matter anyway.

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The CPA is going for "what you can get away with" given the 1098T, rather than what you paid. I would be concerned about other places where he might be doing "creative accounting."

 

The AOTC gets maxed out after 4000 of allowable expenses, so depending on what you actually paid the two schools, the extra amount may not matter anyway.

 

Yes, exactly.  I can't believe I'm going to have to pay this guy.

 

We aren't going to max out the AOTC, nor would it happen if we went along with his flaky reporting, so it does matter--a difference of about a few hundred dollars worth of credit.  The CC tuition was paid in mid-January, so it doesn't affect 2016.  I guess I'll have to give the guy the numbers I think should be reported and finish his job for him.  Hopefully, I've got a better handle on this part of the tax code than the CPA.  Arghh!!  :banghead:

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Not only what Janet said, but you don't submit the 1098 anyway, so you don't have to seek a corrected one.  Take a screenshot of his online acct.

 

Yes, I realize now there is no need for a corrected 1098 and I did take a screenshot of DS's account.  I began questioning the CPA about how he prepared our taxes when I saw he just took the numbers from the 1098-T and reported the full amount of scholarships/tuition from the 1098, ignoring the student account info I gave him that highlighted what we actually paid and what scholarships DS actually received.  It didn't sound right to me.  CPA told me to go with what the 1098 saying, "the IRS matches it up".  I keep trying to tell him the tax code indicates we should report qualified educational expenses, and if we didn't pay it, it can't be 'qualified'.  Sounds like he doesn't know that part of the code well, and simply reports off the 1098.  I just wanted to verify, for my own sanity, so I can tell him how we want it handled.  Would've been easier (and cheaper) to do it myself.

 

I had also asked him whether some expenses were qualified (the tux and music binder my son was required to purchase for his chorale class), and it was at that point that I began realizing that this guy doesn't have a clue.  That was further verified when he sent along a copy of our tax forms for our approval and I saw how he'd handled the 1098 info.  He was set to submit our taxes without even having us look it over, but I insisted we see it beforehand.  Thank goodness!

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I can sympathize.  I tried to find a CPA to help us with our ds's taxes and I could not find a single one that knew anything about scholarship money beyond tuition.  Not only does our ds have full scholarship but he has also earned a research stipend every summer.  Research $$ is grant $$ and falls under the same category as scholarship $$.  It is ridiculous that no one can answer any questions.  We are kicked in Kiddie tax mode and not a single accountant knows how to deal with it at all.  So we fumble through and attempt to figure it out on our own.

 

At least we aren't doing what someone else suggested we do.....just don't pay taxes on the scholarship $$ at all bc the 1098 doesn't get filed. 

Edited by 8FillTheHeart
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I can sympathize.  I tried to find a CPA to help us with our ds's taxes and I could not find a single one that knew anything about scholarship money beyond tuition.  Not only does our ds have full scholarship but he has also earned a research stipend every summer.  Research $$ it grant $$ and falls under the same category as scholarship $$.  It is ridiculous that no one can answer any questions.  We are kicked in Kiddie tax mode and not a single accountant knows how to deal with it at all.  So we fumble through and attempt to figure it out on our own.

 

At least we aren't doing what someone else suggested we do.....just don't pay taxes on the scholarship $$ at all bc the 1098 doesn't get filed. 

 

I read some past threads and saw how many, like you, have encountered clueless CPA's, so I strongly suggested to DH that he make sure the guy he chose had experience with the education tax code.  Of course, the guy assured DH he had done a ton of tax returns dealing with education stuff.  I'm seriously considering telling the guy that, since I had to do most of the leg work, we are expecting a very hefty discount.

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Update~

 

Tax guy did not answer any of my questions, gave me two "options"--one with the original numbers from the 1098-T, that doesn't reflect what happened (and I realized later that he also did not add the amounts for books to qualified expenses), and the second resulting in us owing over $1500, which was an over $2300 swing in the other direction.  I asked him to explain his calculations and to point to where in the tax code he thinks it's ok to over-report the tuition/scholarships.  I asked him how he came up with the numbers for the second "option".  No answers.  After several emails, he finally said he was sending back our documents so that we could seek the help of another tax professional.  On April 11.  Sure.  At least he doesn't have the gall to expect payment.  I cannot believe that a CPA who has been preparing taxes for over 20 years has no clue how to handle educational expenses/scholarships for the AOTC credit.

 

Guess I have a date with tax software on Thursday.

 

Nancy in NH

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Update~

 

Tax guy did not answer any of my questions, gave me two "options"--one with the original numbers from the 1098-T, that doesn't reflect what happened (and I realized later that he also did not add the amounts for books to qualified expenses), and the second resulting in us owing over $1500, which was an over $2300 swing in the other direction.  I asked him to explain his calculations and to point to where in the tax code he thinks it's ok to over-report the tuition/scholarships.  I asked him how he came up with the numbers for the second "option".  No answers.  After several emails, he finally said he was sending back our documents so that we could seek the help of another tax professional.  On April 11.  Sure.  At least he doesn't have the gall to expect payment.  I cannot believe that a CPA who has been preparing taxes for over 20 years has no clue how to handle educational expenses/scholarships for the AOTC credit.

 

Guess I have a date with tax software on Thursday.

 

Nancy in NH

 

Wow. 

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