#1098T #taxes #reportedincome #IRS #taxlaw
What happens if you don’t report your daughter’s 1098T on your taxes? 🤔
When it comes to tax season, it’s important to accurately report all income and deductions to avoid any potential issues with the IRS. The 1098T form is used to report tuition payments and scholarships received by students, which can have an impact on your tax liability. In the case of your daughter’s 1098T form showing a difference between box 5 and box 1, it’s crucial to understand the consequences of not reporting this information on your taxes.
Here’s what can happen if you choose not to report your daughter’s 1098T form on your taxes:
1. Potential IRS Audit:
The IRS has the authority to audit taxpayers who fail to report all income, including the amounts listed on the 1098T form. If you omit this information from your tax return, you could be subject to an audit which may result in additional taxes, penalties, and interest.
2. Tax Liability:
By not reporting the difference between box 5 and box 1 on your daughter’s 1098T form, you may be underreporting your taxable income. This can lead to a higher tax liability than expected, as the IRS may consider the unreported amount as taxable income.
3. Penalties and Interest:
If the IRS determines that you intentionally failed to report your daughter’s 1098T form, you may face penalties and interest on the unpaid taxes. These additional costs can add up quickly and result in financial strain for your family.
4. Legal Consequences:
Failing to report income on your taxes is considered tax evasion, which is a serious offense. If the IRS discovers that you knowingly omitted information from your tax return, you could face criminal charges and potential jail time.
In conclusion, not reporting your daughter’s 1098T form on your taxes can have serious consequences. It’s essential to accurately report all income and deductions to avoid any issues with the IRS. If you’re concerned about the impact of the 1098T form on your tax liability, it’s recommended to seek advice from a tax professional who can provide guidance and assistance.
Remember, honesty and transparency in your tax reporting are key to maintaining compliance with tax laws and regulations. Don’t take any chances when it comes to your taxes – always report all income and deductions accurately to stay on the right side of the law.
>but she actually never got any money because the remaining grant after the tuition was paid was used to pay for her dorm.
I believe the amount that goes towards room and board is taxable.
The IRS will come after you. That’s what’ll happen
Whoever issued your daughter the 1098T also reported to the government that they issued that 1098T. Their own accounting wouldn’t be balanced otherwise. This isn’t under the table cash, you can’t hide something someone else already reported to the IRS.
Why can’t your daughter just file for herself and claim it?
Don’t forget about the education credits, that should help to offset the additional taxes.
News flash: When you get an IRS form (like a 1098, a 1099, and a W-2 form), the IRS always gets a copy of that form, too. The IRS works on a match system.
So if you don’t report what’s on that form, you’re fooling only yourself.
The difference used for your daughter’s room and board is considered income.
The amt spent on room & board is taxable as earned income.
Your daughter can file (but you don’t claim her as dependent). Enter the schloarship/grant under income as scholarship income on her return. Enter the amt of the qualifying expenses (box 1, I think) under educational expenses. If the AOTC hasn’t already been claimed for the past 4 years, she should get that (assuming she meets all the qualifications).
Since she will most likely have very little taxable income, she probably will get a refund. You can then fight it out with her as to who gets to keep the refund.
I’ve worked in higher Ed finance, and I have issued 1098T’s.
Technically, ALL scholarship aid is taxable. But there is an exemption for aid that is used for a qualified education expense. However, room/board/meals are not consider qualified education expenses, and so the exemption does not apply.
Any amount of box 5 exceeding box 1 is taxable income.
The university reports all of your 1098T information to the IRS through the IRS’s “f.i.r.e” portal. If the 1098T isn’t reported on the tax return, the IRS is well aware.
As someone who has heard from families AFTER their student didn’t report their 1098T “income,” my advice is to be legit and add it like you’re supposed to. It’ll catch up with you.
they will probably have u amend ur tax form. 1098T is an IRS form, so they likely already know. plus, u have to report 1098T regardless of where the money was allocated.
source: i once finished my taxes before receiving my 1099 form and IRS had me amend my tax return.
She’s likely required to file because the IRS has that form too so her earned income is 31k.
I mean if its wrong somehow dispute it but no you cannot just not file taxes because you dont want to pay taxes.
Gift aid that pays for room and board is taxable income for the STUDENT. It goes on their tax form.
Hello, to answer your question, you should report the 1098-T on your taxes as the IRS has already received a copy and you are legally obligated to report all income.
The better question is how you should report your 1098-T in coordination with your daughter. Your primary aim should be maximizing the American Opportunity Tax Credit (“AOTC”) since it offers a 1-1 reduction of tax for the first $2,000 of qualified expenses and a 1-.25 reduction in tax for the next $2,000 of qualified expenses.
As you mentioned, your daughter earned $2,000 from her work study and earned $19,000 (difference between box 5 and 1; box 1 should include what you paid out-of-pocket) from taxable scholarships (i.e., used to pay for non-qualified expenses like room & board). I assume you have $0 qualified expenses to take the AOTC since your daughter received more in scholarships then was spent. However, your daughter can choose to recognize more of her non-taxable scholarship income as taxable scholarship income, increasing the amount of qualified expenses until you hit the limit of $4,000. page 16 of [Pub 970](https://www.irs.gov/pub/irs-pdf/p970.pdf)
These will be qualified expenses paid by your daughter as she received the scholarships. Fortunately, you are able to claim expenses paid by your daughter as paid by you for purposes of calculating the AOTC based on [Publication 970 page 20](https://www.irs.gov/pub/irs-pdf/p970.pdf): “**Expenses paid by dependent.** If you claim on your tax return an eligible student who is your dependent, treat any expenses paid (or deemed paid) by your dependent as if you had paid them. Include these expenses when figuring the amount of your American opportunity credit.”
See the example below with the rough numbers you provided
——————————–
*If you file* ***without*** *your daughter recognizing additional income*
Total Income = $2k + $19k = 21k
Standard Deduction = $(13.85k)
Taxable Income = $7.15k
Tax = $715 ($7.15k * 10%) – Daughter’s return
Credit = $0 – your return
**Tax** ***Payment*** **= $715**
————————————–
*If you file* ***with*** *your daughter recognizing additional taxable scholarship income ($4k)*
Total Income = $2k + $19k + $4k = $25k
Standard Deduction = $(13.85k)
Taxable Income = $11.15k
Tax = $1,118 ($11k * 10%)+(150 * 12%)- Daughter’s return
Credit = $2,500 (2k * 100%)+(2k * 25%) – your return
**Tax** ***Refund*** **= -$552.8 ((2,500-1,118))*40%) – only 40% of excess credit is refundable**
As you can see the difference is between owing $715 and being paid $553. ***Above only applies if your qualified expenses are lower than $4,000. If you already have $4,000 of qualified expenses and are receiving the complete AOTC of $2,500 then the above does not apply to you.***
Disclaimer: This is not tax advice. This example is to demonstrate how the AOTC interacts with taxable scholarships. Please see page 16 of [Pub 970](https://www.irs.gov/pub/irs-pdf/p970.pdf) for examples from the IRS for the above. If you make $60k or less, you may qualify for free tax assistance through the [Volunteer Income Tax Assistance (VITA](https://www.benefits.gov/benefit/1543)) who may be able to assist you with the above as well.
Your daughter needs to report the difference between the tuition and the scholarship total as taxable income. When I was on a full ride scholarship, I was having to pay about 2k at tax time. It’s her income, not yours though
Hi I had a full ride scholarship and unfortunately you have to report this. It’s a pain in the butt and it costs a lot of money. I called the school and different accountants so many times and this is just the way it is