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I am filing my taxes via TaxAct, and I am not sure whether my 1098-T Copy B (for students) needs to be reported. On my Copy B it states "This is important tax information and is being furnished to the Internal Revenue Service."

It also states "A college or university that received qualified tuition and related expenses on your behalf is required to file Form 1098-T, above, with the International Revenue Service. A copy of the Form 1098-T must be furnished to you."

Moreoever, it states "Keep for your records." That doesn't tell me whether I have to file.

With that being said, do I need to include this information when I file or has it already been taken care of?

Update:

(a) From http://www.irs.gov/pub/irs-pdf/f1098t.pdf - "This form is provided for informational purposes only."

(b) Page 2 of http://www.irs.gov/pub/irs-pdf/i1098et.pdf - "Who must file: You must file Form 1098-T if you are an eligible educational institution. An eligible educational institution that is a governmental unit, or an agency or instrumentality of a governmental unit, is subject to the reporting requirements of Form 1098-T. A designated officer or employee of the governmental entity must satisfy the reporting requirements of Form 1098-T." I am a person, not an institution.

(c) From https://turbotax.intuit.com/tax-tools/tax-tips/IRS-Tax-Forms/Guide-to-Tax-Form-1098-T--Tuition-Statement/INF22534.html - "Who gets the 1098-T form? - Schools must send the form to the student by January 31 and file a copy with the IRS by February 2."

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In general, scholarship income that you receive that is not used for tuition or books must be included in your gross income and reported as such on your tax return. Scholarship income you receive that is used for those kinds of expenses may be excludable from your gross income. See this IRS information and this related question.

I believe that as represented on the 1098-T, this generally means that if Box 5 (Scholarships and Grants) is greater than Box 1 or 2 (only one of which will be used on your 1098-T), you received taxable scholarship income. If Box 5 is less than or equal to Box 1/2, you did not receive taxable scholarship income. This TaxSlayer page draws the same conclusion.

However, you should realize that the 1098-T is not what makes you have to pay or not pay taxes. You incur the taxes by receiving scholarship money, and you may reduce your tax liability by paying tuition. The 1098-T is simply a record of payments that have already been made.

For instance, if you received $10,000 in scholarship money --- that is, actually received checks for that amount or had that amount deposited into your bank account --- then your income went up by $10,000. If you yourself paid tuition, it is likely that you can exclude the amount of the tuition from your taxable income, reducing the tax you owe (see the IRS page linked above). However, if you received $10,000 in actual money and in addition your tuition was paid by the scholarship (with money you never actually had in your own bank account), then the entire $10,000 would be taxable. You do not give enough information in your question to be sure which of these situations is closer to your own. However, you should be able to decide by looking at your bank account: look at how much money you received and how much you spent on tuition. If you received more scholarship money than the tuition you paid out of pocket, you owe taxes on the remainder. (I emphasize that this is just a general rule of thumb and should not be taken as tax advice; you should review the IRS information and/or consult a tax professional to determine what part of your scholarship income is taxable.)

In addition, as this (now rather old) article from the New York Society of CPAs notes, "many colleges and universities prepare 1098-Ts incorrectly and report tuition and related expenses inconsistently". This means you should be careful to reconcile the 1098-T with your own financial records of what money you actually received and paid. When I was in grad school there was a good deal of hand-wringing and hair-pulling each year among the students as we tried to determine what relationship (if any) the 1098-T bore to the financial facts.

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You are confused about a couple of terms:

  • filing means that a person/company/university sends a form to the IRS.
  • report means that the information on a form is then included on a another tax form.

For example you work for company A:

  • They file a W-2 two ways: one copy to the IRS; another copy to you.
  • You report the numbers on the W-2 when completing your 1040-(EZ/A).
  • Company A also uses the numbers on the W-2 when determining how much they paid in wages when they are completing their tax forms.
  • Back in a time when people filed their taxes by mail a person would attach one of the copies of the W-2 to their 1040 and file the 1040 and W-2 with the IRS.
  • The IRS matches the information filed by the tax payer with the information filed by the employer.

As to the 1098-T:

  • The College/University files a copy with the student and with the IRS
  • The student or the parents report the information on the 1098-T when completing their 1040 if they want to claim one of the education tax credits or deductions.
  • Since the 1098-T may also mention scholarship money that may also play a role in completing a 1040.
  • The taxpayer doesn't have file a copy of the 1098-T.
  • If the taxpayer doesn't want to, or can't, claim an education deduction the numbers won't even make it on a tax form they file.
  • But if they do report the numbers, the IRS will be looking for matching 1098-T filed by the university.

It is likely that you or your parents will use the 1098-T. You don't have to file a copy with the IRS. You and your parents need to determine who should be reporting the educational expenses: you or your parents.

  • When (and only when) I included the 1098-T information on TaxAct, it claimed that I owed about $700 to the Federal (I am on a scholarship and I'm not a dependent). I don't see what advantage I would have in including this information if it is just going to force me to write a check to Uncle Sam. – The Substitute Mar 22 '15 at 13:04
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    @TheSubstitute: If you owe $700 based on scholarships you received, then you owe $700. Not reporting it won't change the fact that you received the money; it just means you haven't accurately reported your income, and you could face penalties later if the IRS realizes that. – BrenBarn Mar 22 '15 at 17:38
  • @BrenBarn, I was worried of that, but I don't see where the IRS claims that the 1098-T has to be reported by the student. I just don't want to write a check if I don't have to. – The Substitute Mar 23 '15 at 0:36
  • I did the same thing about 4 years ago. TaxAct claimed I owed $500 once I included the 1098-T info, then I read that the 1098-T didn't have to be reported so I didn't include the 1098-T (and I didn't owe $500). I just want to be on the safe side while not writing an unnecessary check. – The Substitute Mar 23 '15 at 0:38
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    @TheSubstitute: It is not that the 1098-T has to be reported. It is that the income may have to be reported. Whether you have to report the income depends on various factors (whether it was paying tuition vs. living expenses, etc.), but if you have to report it, you have to report it, regardless of the 1098-T. – BrenBarn Mar 23 '15 at 2:55

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