Hm, interesting comments. Okay, so I'm looking at the fall bill right now. The fees charged: legal services fee; career services fee; arts fee; his program (his major) fee; the instructional fee (tuition). For the purposes of the education credits and deductions (none of which I qualify for), I can see how these might not be considered QEE. And I know that I paid for these separately. These fees are not covered under the tuition waiver except for the general fee and the instructional fee. For the purposes of my 529 withdrawal, however, these fees ARE considered QEE. (as far as I know, because they are considered a requirement to enroll) That's a separate issue, though.
The 1098T reflects fall and spring. I am sure about that. I asked about it. If I add up those fees listed above (x 2 for 2 semesters) = it falls well short of the $1100 additional that's in the scholarships/grants/credits box. The housing deposit fee was refunded as part of the bill. So, I'm really just not sure what this $1100 is. I don't see why anything above that $`1750 marked for R/B would be taxable. Really confusing. I am going to hope our tax prep person can figure this out, because I sure can't. I'm going to call the school and see if I can get someone to break this down for me. When I called to ask about the 1098T last time, all they could tell me was that it included fall and spring and any other questions -- they said go talk to to your tax advisor.
BelknapPointRegistered UserPosts: 4,182Senior Member
For the purposes of my 529 withdrawal, however, these fees ARE considered QEE. (as far as I know, because they are considered a requirement to enroll)
Not necessarily. It's quite possible that a school is charging fees that are "a requirement to enroll" that are not considered QEE for a 529 distribution. The first thing that comes to mind is health insurance for the student that is billed by the college because the student does not have other eligible health insurance. This is not a 529 QEE.
The 1098T reflects fall and spring.
Reflects what for fall and spring? A 2018 1098-T, in box 1, should only show amounts that were actually paid in 2018, from any source, for qualified tuition and related expenses. Trying to equate an amount in box 1 with the numbers on a billing statement is a waste of time. Anyway, the numbers that a school puts on a 1098-T are notoriously inaccurate. Don't get yourself wrapped around the axle on what the school is reporting. Rely on your own numbers for how much was paid when and for what. That's what matters.
If none of the other scholarships or grants paid for nonqualified expenses (for the purpose of the determination of tax-free scholarships and education credits that is tuition, qualified fees and books), then they are not taxable.
If the $1,750 was the only taxable scholarship, then report that.
We didn't take health insurance through the school. The fees they are charging, even if not QEE for our 529 (though they do appear to be) are pretty minimal. We spent way more out of pocket than we used 529 funds for. So should be okay there.
And yes, you all have made a convincing case for me to basically disregard the 1098T and just report what I know is taxable. $1750 R&B scholarship is the only scholarship he got. So that's what we'll report.
BelknapPointRegistered UserPosts: 4,182Senior Member
We didn't take health insurance through the school. The fees they are charging, even if not QEE for our 529 (though they do appear to be) are pretty minimal. We spent way more out of pocket than we used 529 funds for. So should be okay there.
Mentioning school-billed health insurance was not done because I thought that applied to your situation. I was using it as an example to counter your apparent assertion that any fee required for enrollment is a 529 QEE.
Okay -- - our tax guy has completed DS' return. I have no idea if this is correct, but this is what he did on the 1040:
• $1600 reported on line 1 (summer job)
• $1750 listed on line 6 for the taxable scholarship (also listed on line 21 of Schedule 1 with description of SCH)
• Then he shows line 8 as a standard deduction of $1950 (unsure of where he got his; DS is being claimed as a dependent by us)
• This leaves $1400 as taxable income and so we wind up owing because he had very little withheld from his summer job.
Does this sound right? I'm scratching my head at this but maybe it is correct. Nothing reported on the form for the 529 stuff since we used disbursements for QEE.
@BelknapPoint and any other tax-savvy folks -- does this seem correct? Thanks.
Okay -- I see where he's getting the standard deduction. It's the greater of $1100 or $350 plus his earnings. Earnings were $1600 + $350 = $1950. This is because he is being claimed as a dependent by us. So no $12,000 standard deduction. Interesting.
Yes. So he earned $1600 from his summer job and had $6 withheld. $1750 is the scholarship. That's $3350 total income. $1950 is being used for his deduction. That leaves $1400 as the taxable portion of income. He's taxed at 10%. So he owes $134.
I'd pay $134 to get $1750 any day.
I think what I wasn't understanding is that the standard deduction for a single filing -- which is $12,000 --- does not apply if you can be claimed as a dependent by someone else.
Would love to know if this assessment sounds correct.
BelknapPointRegistered UserPosts: 4,182Senior Member
edited February 26
Generally, for the purpose of calculating a standard deduction for a dependent, the taxable scholarship amount should be treated as earned income and added to the wage income from the summer job. Based on the information you have provided, this would make the standard deduction for your son $3,700.
See the Standard Deduction Worksheet for Dependents on page 35 of the IRS 1040 Instructions for 2018.
Also, taxable scholarships should be included on line 1 of form 1040, as per the 1040 instructions on page 27.
Is your son declaring taxable scholarship income because the 529 distributions exceed the amount of adjusted qualified education expenses? Another way to handle this is to declare part of the 529 distribution as non-qualified and pay tax on the earnings portion of the non-qualified 529 distribution. However, the 529 earnings are not considered earned income for the purpose of determining a standard deduction for a dependent, so in your son's case and depending on the numbers, this may lead to a higher tax bill.
Edited to add: I went back and reviewed your previous posts. You state that the taxable scholarship is being explicitly used for room and board. The taxable scholarship amount should be included on line 1 of your son's 1040 with the notation "SCH" on the dotted line. See page 27 of the 1040 instructions. Your son's standard deduction as a dependent should be $3,700. Go back and talk to your tax guy.
@BelknapPoint Yes, the scholarship is being used for R&B exclusively. It's even noted as such on the bill from the university (e.g, $1750 partial scholarship for room and and board).
Got it -- line 1 is where it should be listed. That is a great catch. But how are you arriving at $3700 for the standard deduction? Is it the combined $3350 for earnings (all on line 1) + $350?
The IRS absolutely would not have corrected it. Their matching system doesn't care about scholarships. And if they did catch it, they'd have complained about it not being on the Wages line.
Replies to: What tax form is issued for scholarships?
Box 1 doesn't show the total paid, it show the total QEE expenses that were paid. QEE does not include room and board.
The 1098T reflects fall and spring. I am sure about that. I asked about it. If I add up those fees listed above (x 2 for 2 semesters) = it falls well short of the $1100 additional that's in the scholarships/grants/credits box. The housing deposit fee was refunded as part of the bill. So, I'm really just not sure what this $1100 is. I don't see why anything above that $`1750 marked for R/B would be taxable. Really confusing. I am going to hope our tax prep person can figure this out, because I sure can't. I'm going to call the school and see if I can get someone to break this down for me. When I called to ask about the 1098T last time, all they could tell me was that it included fall and spring and any other questions -- they said go talk to to your tax advisor.
Not necessarily. It's quite possible that a school is charging fees that are "a requirement to enroll" that are not considered QEE for a 529 distribution. The first thing that comes to mind is health insurance for the student that is billed by the college because the student does not have other eligible health insurance. This is not a 529 QEE.
Reflects what for fall and spring? A 2018 1098-T, in box 1, should only show amounts that were actually paid in 2018, from any source, for qualified tuition and related expenses. Trying to equate an amount in box 1 with the numbers on a billing statement is a waste of time. Anyway, the numbers that a school puts on a 1098-T are notoriously inaccurate. Don't get yourself wrapped around the axle on what the school is reporting. Rely on your own numbers for how much was paid when and for what. That's what matters.
If none of the other scholarships or grants paid for nonqualified expenses (for the purpose of the determination of tax-free scholarships and education credits that is tuition, qualified fees and books), then they are not taxable.
If the $1,750 was the only taxable scholarship, then report that.
And yes, you all have made a convincing case for me to basically disregard the 1098T and just report what I know is taxable. $1750 R&B scholarship is the only scholarship he got. So that's what we'll report.
Thanks!
Mentioning school-billed health insurance was not done because I thought that applied to your situation. I was using it as an example to counter your apparent assertion that any fee required for enrollment is a 529 QEE.
• $1600 reported on line 1 (summer job)
• $1750 listed on line 6 for the taxable scholarship (also listed on line 21 of Schedule 1 with description of SCH)
• Then he shows line 8 as a standard deduction of $1950 (unsure of where he got his; DS is being claimed as a dependent by us)
• This leaves $1400 as taxable income and so we wind up owing because he had very little withheld from his summer job.
Does this sound right? I'm scratching my head at this but maybe it is correct. Nothing reported on the form for the 529 stuff since we used disbursements for QEE.
@BelknapPoint and any other tax-savvy folks -- does this seem correct? Thanks.
I'd pay $134 to get $1750 any day.
I think what I wasn't understanding is that the standard deduction for a single filing -- which is $12,000 --- does not apply if you can be claimed as a dependent by someone else.
Would love to know if this assessment sounds correct.
See the Standard Deduction Worksheet for Dependents on page 35 of the IRS 1040 Instructions for 2018.
https://www.irs.gov/pub/irs-pdf/i1040gi.pdf
Also, taxable scholarships should be included on line 1 of form 1040, as per the 1040 instructions on page 27.
Is your son declaring taxable scholarship income because the 529 distributions exceed the amount of adjusted qualified education expenses? Another way to handle this is to declare part of the 529 distribution as non-qualified and pay tax on the earnings portion of the non-qualified 529 distribution. However, the 529 earnings are not considered earned income for the purpose of determining a standard deduction for a dependent, so in your son's case and depending on the numbers, this may lead to a higher tax bill.
Edited to add: I went back and reviewed your previous posts. You state that the taxable scholarship is being explicitly used for room and board. The taxable scholarship amount should be included on line 1 of your son's 1040 with the notation "SCH" on the dotted line. See page 27 of the 1040 instructions. Your son's standard deduction as a dependent should be $3,700. Go back and talk to your tax guy.
Got it -- line 1 is where it should be listed. That is a great catch. But how are you arriving at $3700 for the standard deduction? Is it the combined $3350 for earnings (all on line 1) + $350?
If so, then he should have no tax liability.
Yes.
Part of me wonders if the IRS would have corrected it. hahaha.