1098-T Box 4

[mwpope]

My client received a 2010 1098-t with 4K in box 4 as a refund of prior year tuition. Do I net down the 2010 education cost or does this necessitate amending the 2009?

[Pacun]

My client received a 2010 1098-t with 4K in box 4 as a refund of prior year tuition. Do I net down the 2010 education cost or does this necessitate amending the 2009?

If you reduce that amount from the previous year, what's the net result? Let's say that your client spent 10K in eduction last year and you claimed the AOC. If that's the case, it will not make any difference and the most correct way of dealing with this 1098-T is to add this 4K to line 21 in 2010. If in 2009, the total university payments were only those 4K and you claim AOC, you should amend 2009. Netting is not an option since each year is independent but you need to verify that in fact the refund was for a previous year.

Another factors you should consider is the date when the student graduate or stop going to school AND tax brackets for each year.

[Bart]

My client received a 2010 1098-t with 4K in box 4 as a refund of prior year tuition. Do I net down the 2010 education cost or does this necessitate amending the 2009?

It depends on how the taxpayer used the tuition in the prior year. Read Pub 970.

If you took a deduction in the prior year you pick up the difference as income on line 21 in the current year. If you took a credit in the prior year you recalculate the credit in the prior year and add the difference to the current year tax on line 44 of form 1040 with "ERC 588" written to the left of the tax amount on line 44.