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Question about 1098-T, 1099-Q and taxes

lillymomlillymom Posts: 109Registered User Junior Member
My DD college charges full tuition on the first semester, therefore her 1098-T shows the full amount of tuition billed but only the first semester of grants received. Last year I read some post that I can consider for tax purpose only the fall semester tuition. Am I correct on this? In case I’m ever audit, I maintain a spreadsheet showing how I allocate the charges.

My question is about outside scholarship. DD received one last August, for tax purpose can I split it in half between each semester? Or do I have to consider the full amount in her 2011 taxes.

My second question is about 1099-Q. DD prepaid tuition plan statement shows distribution for 3 semesters (Jan’10, Sep’11, Nov’11). The Nov’11 distribution was for her 2012 spring semester tuition. Can I allocate this to 2012 for tax purpose?

My third question is also about 1099-Q. For my DS college I had to request a refund from the prepaid tuition plan since his college does not bill prepaid plans. However his first semester was fully paid by scholarships so the refund was not actually used to pay his first semester tuition. But I’m using it to pay his 2012 spring semester along with the second refund. So for tax purpose, even thought the refund was received in 2011 can I allocate it to 2012 tuition?
Post edited by lillymom on

Replies to: Question about 1098-T, 1099-Q and taxes

  • annoyingdadannoyingdad Posts: 2,261Registered User Senior Member
    With the IRS and income taxes everything is about when something is received and when it's paid. If you get a check in 2012 for work done in 2011, it's income for 2012. If you pay a medical bill in 2012 for a service in 2011 it's deductible in 2012. If you pay 2012 property taxes in 2011, it's deductible in 2011.

    Grants/scholarship amounts are received when they're credited to the students account. Tuition/fees etc. are paid when you send them a check, charge them or whatever. Did you pay the full year charges in 2011 or only the 1st semester? When was the outside scholarship credited to her account and for how much?

    For your daughter's 1099-Q, when was the November amount credited to her account? You really do want the 1099-Q for a tax year to match or be less than the amount paid for qualified expenses in a tax year.

    With your son's 1099-Q, distributions from a qualified plan in a tax year need to be offset by qualified expenses in the same tax year. Did you have room and board or other qualified expenses for your son in 2011?
  • lillymomlillymom Posts: 109Registered User Junior Member
    annoyingdad: in relation to tuition/fees for my DD, her college charges for spring semester showed up in November 2011. I did not actually pay or send a check because I have a tuition management plan (10months payment). I’m fairly certain I can transfer this charges to 2012 for tax purpose.

    I’m most concerned if I can do the same for the scholarship and prepaid tuition. Both were credit to her account in 2011. It seems odd to me that I cannot allocate to 2012 since they were clearly used to cover the spring semester charges. I’m allocating the charges and credits based on academic semester, not actual calendar date. Based on your first paragraph, I'm not allowed to do that for scholarship and tuition plan, right?

    In relation to my son’s 1099-Q distribution, I just found out that for QTP he can include room and board as qualified expenses so this part is taken care now. Thanks.
  • collegeparentscollegeparents Posts: 197Registered User Junior Member
    Lilly.....age old problem here. IRS and taxes operate on a calendar year, while schools obviously work on academic years that span two calendar years. There will always be problems with the 1099Q and 1098T forms always matching up.

    If you keep VERY detailed records, and are always VERY consistent with how you manage your payments then I think you'd have a solid leg to stand on if you ever get audited.

    That being said, I'd always try to follow dad's scenario above (if possible) and make payments to match expenses when feasible.
  • annoyingdadannoyingdad Posts: 2,261Registered User Senior Member
    The IRS is not known for being a flexible institution. Maybe a CPA or other tax expert can chime in or someone can post something where the IRS says payments and receipts can be allocated how a taxpayer wants, but until then I'll stand by my statements above.

    Lilly, are you doing taxes manually or using software or a provider? If using software it should be asking what expenses, receipts of scholarship/grant money and distributions you had in 2011 and doing the appropriate calculations with those numbers you give it.

    Read page 11 of IRS Publication 17 starting with "When Do I Report My Income and Expenses". It discusses accounting periods and accounting methods.

    http://www.irs.gov/pub/irs-pdf/p17.pdf
  • lillymomlillymom Posts: 109Registered User Junior Member
    annoyingdad: My husband and I do the taxes manually first. He is responsible for the investment part and I for income and education stuff. We then use a software and are able to identify any mistake. Actually, I enjoy doing it manually.

    I’ll figure my taxes both way, the difference may be so small that may not worth the risk of being audit and keep up with a VERY detailed record as collegeparents mentioned. Thanks for your help.
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