Terry D EA Posted February 25, 2022 Report Share Posted February 25, 2022 The is a first for me. Client paid out of pocket for part of their tuition. The remaining funds came from financial aid. The college chose to split the financial aid between semesters. For this semester, they did not return to school but plan on doing so in the future. The college did not issue a 1098-T and when asked they told the client they didn't need one. I told them to go back and ask again and get a printout of their account. The unused excess is being held by the school and a check has not been placed in the client's hands. So, the excess is not taxable income yet correct? What if she transfers the funds to her husband's account (they both attend the same school) for his education does it become taxable income? At first glance I say no, cause she never had the funds given to her. This sort of mirrors what the college told her by giving her three options which were use it for yourself in the future, accept a check, or transfer it. Opinions or a refence would be great. Quote Link to comment Share on other sites More sharing options...
TexTaxToo Posted February 25, 2022 Report Share Posted February 25, 2022 No cites, but I would suggest that if the money shows as a credit on their account which they are free to cash out at any time, then they have constructively received it and must account for it this year - any amount not used for qualified expenses is taxable income. If it is merely a promise of future aid which is contingent on them enrolling in a future semester, then it hasn't been received. This sounds like a Pell grant. These are often awarded in amounts in excess of the tuition at community colleges. The excess would be credited to the account and often is issued as a debit card which they call a "refund". Again, if not used for books or other qualified expenses, the excess is taxable. Unfortunately, there is a "loophole" such that if the grant is greater than the tuition and fees, the college is not required to issue a 1098-T. 1 Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted February 25, 2022 Author Report Share Posted February 25, 2022 I have been concerned about "constructive receipt" as well. Transferring the funds to the husband's account seems to fall under the "constructive receipt" as well. <<<<<there is a "loophole" such that if the grant is greater than the tuition and fees, the college is not required to issue a 1098-T.>>>>> Not being required to issue the 1098-T and telling the student they don't need it is two completely different things. I am holding this one until I get the account statement. Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted March 2, 2022 Author Report Share Posted March 2, 2022 Boosting this up. This poor student is doing everything they know to get the account statement from the college. The latest info, the lady at the college who handles this has advised her she does not need to include anything from form 1098T and she doesn't need one. Ok we discussed that, but the student is clearly telling me there was an excess between the financial aid and what was actually spent. I believe those amounts are taxable income even though the student has not received the funds but they remain in her account is constructively received. Any suggestions on how to proceed? I asked if I could contact the school so waiting to hear. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted March 2, 2022 Report Share Posted March 2, 2022 Bursar's statement. Usually the student can download a copy online. 1 Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted March 3, 2022 Author Report Share Posted March 3, 2022 Finally got the statement. 3 Quote Link to comment Share on other sites More sharing options...
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