Earning too much money in college

Does the student get an end-of-year 1099 for scholarship and grant money?

If you are earning this money in 2017…it won’t appear on your financial aid applications as income until the 2019-2020 school year. Will you still be in college then??

The upcoming year is 2017-2018 and used 2015 income info. (Your junior year??)

2018-2019 will use 2016 income info. (Your senior year???)

2019-2020 will use 2017 income info.

Are you in college now? What year? According to other threads you finished your freshman year of college in June 2016, which would mean you are a sophomore now. If you will be graduating from undergrad school in spring 2019, you wouldn’t report money earned in 2017 or after on your financial aid forms…at all…because you will no longer be in undergrad school.

If this is counted as income and not co-op…it will be an asset if it’s in your bank account when you file your FAFSA.

But there’s more. The fafsa for 2018-2019 will be blue to be filed on October 1, 2018. That will be for the 2018-2019 school year. How much of that money will you have earned by that date?? How much will you have in the bank?

@thumper1 I guess i likely will only have to worry about my EFC for my last year at college. Although, if I participate in a co-op that means I will be in college for an extra semester or 2. By then i expect to have saved a lot of money though(I try to save when given the chance and only spend it on food pretty much).

Yeah. I’d just save it and pay whatever the impact is on your EFC. It probably won’t be much if you’re only looking at 5-10k.

It’s not a 1099 for scholarships, it is a 1098-t. The school in NOT required to provide the form if there is an excess of scholarships over tuition, only if tuition and qualified expenses exceeds the amount the school provided in scholarships. Neither of DD’s schools send the forms anymore, but they are on the portals.

The 1098-t is often incorrect. It might not include amounts received in outside scholarships (even if you report them), it may include tuition for semesters not in the tax year, it usually doesn’t include books.

I’m confused. The school provides (via its portal) a 1098-t when tuition/QEE EXCEED what school provides in scholarships? Shouldn’t it be the opposite?

No, because the purpose of the 1098T is to help claim an education tax credit like AOTC. So you would need some qualified education expenses that are not covered by scholarships.

If the scholarships exceed QEE, then the school is not required to issue a 1098T, but can.

Got it.

But if taxes are owed on scholarship/grant funds received in excess of QEE, how is the excess reported to the IRS?

Another question: Scholarships and grants are awarded for an academic year. Taxes are paid for a calendar year earnings. If there was no excess above QEE spring of 2016, but there WAS excess fall 2016 because of a newly awarded scholarship, can the fall excess be applied (on paper) over the whole of calendar year 2016 so as not to pay taxes on it?

The excess isn’t reported to the IRS. In fact, I don’t think the IRS receives 1098-t at all, and the 1098-has the student’s SSN on it, not the parents. Yes, the student has to be a dependent for the parent to take the AOTC, but that’s a lot of matching SSN. Our 1098-t forms have never been correct, so even if the IRS received a copy, it would be auditing every single student in the USA.

Are there students who don’t pay taxes on their scholarship overage? Plenty of them (and most don’t know they have to include the overage as unearned income).

“Are there students who don’t pay taxes on their scholarship overage? Plenty of them (and most don’t know they have to include the overage as unearned income).”

Unfortunately. But once you know, you can’t really magically forget… in good faith.

:frowning:

https://www.irs.gov/uac/form-1098-t-tuition-statement

^according to this the issuer of the information form is supposed to furnish copy A to the IRS.

It also says that a 1098T is required to claim AOTC.

@Prometheanart , don’t feel bad if this is a bit overwhelming. You’re getting good input here so just take it all in, talk with your folks, maybe a CPA, if you know one, and do the best you can. As Courtney mentioned, it’s about doing things in ‘good faith’ - you may make mistakes, but just do the best you can. you definitely don’t want to get sideways with the IRS though, so don’t be tempted to ignore taxable amounts.

Also, this stuff is even confusing for CPAs, especially if they’re not familiar with all the FA intricacies.

As for the kiddie tax bit, it’s form 8615 and does have the potential of impacting the parents’ taxes too. It’s main focus is assets and collecting taxes on unearned income from them, but taxable scholarships are also unearned so they count too. just google it.

Lastly, look at IRS publication 970 for everything you ever wanted to know, and more, about taxing education benefits.

Simplest thing is to use turbotax or equivalent and just answer all the questions correctly - it’ll add appropritate forms, schedules, etc.

“Simplest thing is to use turbotax or equivalent and just answer all the questions correctly - it’ll add appropritate forms, schedules, etc.”

Literally. Paid like $55 for Premium (needed it for 1099-DIV and 1099-INT etc but I think Deluxe is enough for taxable scholarships) and it was so worth it.

@CourtneyThurston @lz57c4 Out of curiosity, what would be the result if I just didn’t worry about any of this? Like if i decide to just fill out whatever tax form my future boss gives me and my FAFSA as is. It seems like I would be doing something wrong or missing out on something.
I still haven’t looked that much into what a lot of you guys mentioned as I still need to study, haha.

If you mean like not declare your income/assets on your FAFSA, that’s a crime. Unclear what exactly you meant by that.

no, i mean filling it all out honestly. I guess the simple answer would be that I get taxed more right?

Maybe, maybe not. If you make under like 6400, it doesn’t matter for either.

You fill out the withholding taxes with your employer. YOU are responsible for correctly filing your taxes with the W2 your employer provides, your scholarship information, your bill from the university, interest statements from your bank accounts, etc. YOU. Not your employer. you are also responsible for filling out the FAFSA correctly

If you have a $0 EFC or close to it now, most likely your parents’ income is very low.
If it is under $25,000 and they can file a 1040A tax form or receive a means tested benefit like food stamps, then you would qualify for auto zero EFC.
Then student income and assets and parent assets are not considered.

Will your parents’ income still be low in 2017?

^this applies to FAFSA EFC