@privateID – is that all they questioned with that notice? What did you send back in response? I actually found a website where several people were discussing this exact issue and someone posted a form letter to use when sending back a response with any documentation. Also, if I might ask, did you get this form before any refund or after?
I agree with allyphoe’s answers to your earlier questions.
My experience is that the IRS notices in these situations typically arrive 15 to 18 months after the return in question was filed, so that would almost always be after a refund is issued.
Thanks for the responses. I’m surprised the notices come so late. You’d think the govt would withhold the refund until the matter is settled. Not that I’d be happy one way or the other. From what I’ve read, these notices are 1)somewhat stressful to get at first 2) easy enough to resolve if you keep good records 3) seem to be resolved within a few months of responding to their notice and 4) Rinse and repeat.
I thought I had it twice, but I can only find one response on my computer. I basically just told them I disagreed with their recommended changes (to treat the 529 expenditures as non-qualified). I gave them an itemized list showing where each dollar came from. I didn’t even have all the receipts from the books. My letter was dated Nov 2016 for my 2014 return.
That comports with the 15-18 months @BelknapPoint mentioned. I assume your case was resolved quickly? It should be. I understand the burden is on the taxpayer to prove what they’re using the earnings portion of their 529 for, but I can’t imagine why the govt would question very reasonable numbers and an itemized list and/or photocopied receipts.
By the way, here is the form letter I found on another website should anyone find it useful in responding to these kinds of notices…
In case of letter about 529:
Dear Sir or Madam:
Re: Joe & Mary Taxpayer SSN: 123-45-6789 & 987-65-4321 Notice number: CPxxxx Tax Year: 2011
I am responding on behalf of the above referenced taxpayers, to your notice dated August 19, 2013 for a proposed increase in tax of $XXX due to earnings from a qualified tuition program (QTP) distribution. A copy of the notice is enclosed for your reference.
The taxpayer received a gross distribution of $XXX0 with earnings of $XXX.XX from the [Name of Savings Plan] in [YEAR]. A copy of the Form 1099-Q is enclosed. The earnings of $XXX.XX are non-taxable since the qualified expenses exceeded the amount of distribution.
The [YEAR] total qualified education expenses were $XXXXXX:
Tuition/Fees xxxx
Books and Supplies Room$ xxxx
Board $xxxx
Total $XXXX
Based on the above, we respectfully request that the IRS accept the return as originally filed and issue a revised notice to the taxpayers.
If you have any questions, please contact me (123) 456-7890.
(attach any receipts if needed.)
I always have the 529 disbursement sent right to the school. Hopefully that will alleviate me every getting that dreaded letter.
You aren’t always able to have the disbursement sent to school. Kids move off campus. There are other items - books, computer.
As long as there are direct billed expenses that need to be paid, a 529 distribution can be sent to the school.
@WantWhatsBest do you qualify for AOTC? He has a tuition waiver, but could you claim the fees and books?
The taxable scholarships are reported on his return. In online tax software I’ve used, if you specify that the scholarship paid for room and board, it made it automatically taxable.
No, we don’t qualify . We won’t be taking any tax credits other than the child tax credit.
@BelknapPoint and @mommdc … and anyone else who is willing to chime in:
I now have concrete numbers on the 1098-T.
Box 1 (Payments received) are close to $20k.
Box 2 (amount billed for qualified tuition and expenses) shows nothing. DS has tuition waiver through staff benefit.
Box 5 Scholarships and Grants shows $21k
Box 7 is checked to show box 1 includes amounts for January-March 2019
I’m not understanding these amounts. The amount we were actually billed after the tuition waiver was applied and the scholarship toward R&B ($1750) was applied doesn’t line up with this at all. Are they considering the tuition waiver a scholarship or grant?
Further, the 1099-Q shows a disbursement of $6300, which we used for the balance of R&B (directly billed) and supplies (have receipts). All QEEs exceed 529 disbursements.
I know these forms would never match but I’m now wondering if the amount in box 5 will be perceived as taxable since there is nothing in box 2.
Or is the entire 1098-T form meaningless except as a comparison against 1099-Q?
And finally, I know for a fact that DS had $1750 scholarship in fall 2018. And that this was used entirely for R&B, which makes it taxable. But where is that reported on the 1098-T? Or is that just something you track on your own and report?
Box 2 entries are no longer allowed. Pay no attention to box 2.
Do the tuition waiver and room and board scholarship add up to $21,000?
Do the tuition waiver and fees add up to $20,000?
Box 1 reports tuition and qualified fees paid in 2018.
Box 5 reports scholarships and grants received in 2018.
The form 1098T is an information form for assistance in claiming education tax credits.
As long as you have receipts for room, board and other expenses that qualify for tax-free treatment of 529 distributions, and those expenses minus the room and board scholarship match what you withdrew from the 529, you should be fine.
When you enter the 1098T information as it stands into the tax software when you do your son’s return, then it will say that he doesn’t qualify for an education tax credit, but simply say in one of the questions that he had a scholarship of $1750 that paid for room and board, that should make it taxable income then.
Ok, good. So the boxes that matter I think are Box 1 and Box 5. Box 5 shows a scholarship of close to $21k. That’s definitely not the case except if they are including the waiver as a scholarship? From what I’m reading, the 1098-T is most useful and primarily used to calculated education credits and deductions. And, I won’t be taking any of those.
Still unclear where the taxable scholarship is showing on this form. I know for a fact it’s $1750. Not $21k. Is this normally what happens or should I call the school and determine how they arrived at that?
My D gets a tuition scholarship that pays dollar for dollar for tuition. It is reported in box 5 on 1098T and is reported in box 1 (as “payment”).
The school makes a credit in the amount of the tuition waiver to your son’s account, so this is probably how they have to account for it.
Did the $1750 come from an outside source and was it paid to the university?
Thanks so much for the fast response. Here are some answers:
Do the tuition waiver and room and board scholarship add up to $21,000?
– NO. They add up to around $16,000.
Do the tuition waiver and fees add up to $20,000?
– NO. They add up to less than that.
Box 1 reports tuition and qualified fees paid in 2018.
Box 5 reports scholarships and grants received in 2018.
The form 1098T is an information form for assistance in claiming education tax credits.
As long as you have receipts for room, board and other expenses that qualify for tax-free treatment of 529 distributions, and those expenses minus the room and board scholarship match what you withdrew from the 529, you should be fine.
–I DO and THEY DO.
When you enter the 1098T information as it stands into the tax software when you do your son’s return, then it will say that he doesn’t qualify for an education tax credit, but simply say in one of the questions that he had a scholarship of $1750 that paid for room and board, that should make it taxable income then.
– GOT IT.
I would keep copies of all payments made and tuition statements, and since you don’t intend to claim the AOTC, I don’t think you need to worry about the accuracy of the form.
Re: reporting of the waiver. I think that must be how the school does it, but I am unclear where the additional $4-5k is coming from that it is showing. I’m looking at the fall bill now, and it has a “Charges” and a “Payment” column. The charges show all the fees, room and board, tuition, etc. It shows the staff waiver as a credit and that amount is equal to some of the tuition and fees. The $1750 came from the university as a merit scholarship. it shows up under the payment column of the school’s bill as “Sch-partial room/board”. So what I was directly billed for fall 2018 was the balance left after the tuition waiver and the $1750 scholarship was applied. And that matches exactly what one of the 529 withdrawals was. (The other withdrawal was exclusively for a required computer.)
See any issues???
The 529 amounts check out to back up the 1099. And the taxable scholarship is correctly being reported.
I don’t think there should be issues.
If you want to know why the school reported those numbers, you could call.
That’s what I’m thinking. No credits or deductions claimed, no issue.
I’m more concerned about the taxable scholarship and any questions about that since it’s showing $21k in scholarships when it was only $1750. I’m going to call the school just for my own clarity and sanity. I need to understand how they are calculating these numbers. Regardless, I’ll obviously report the $1750 in taxable scholarship.
Wow – this is my first year dealing with this and it’s super confusing.