Form 1098-T

[MargaretMort]

Client's son received the 1098T for the 2009 tax year. A new GI Bill gives parents the right to assign some of their Education assistance to dependents. Father immediately applied for this assistance and the university received payment. This money applies to the Fall 2009 semester and the Spring 2010 semester both of which the parents have paid for. The university has not reimbursed the parents as of this writing.

Now, my question is: The 1098T shows the payments for the 2009 tax year. I found out the amount of the reimbursement they haven't received and deducted it from the amount shown on the 1098T. In the wee small hours of the morning I am having second thoughts. I have just about decided to use the full amount of the 1098T as a deduction against the 2009 income-the entire amount is not fully deductible-and see what the school issues for the 2010 year.

Have I over thought myself, as usual? My thanks for helping clear up my mind. MM

[LindaB]

I have just about decided to use the full amount of the 1098T as a deduction against the 2009 income-the entire amount is not fully deductible-and see what the school issues for the 2010 year.

Are you doing the tuition and fees deduction or one of the credits?

[MargaretMort]

Tuition and fees worked best. MM

[LindaB]

Tuition and fees worked best. MM

Is it possible the school is going to keep the money to pay for future semesters i.e. fall 2010? Until the parents have the money in hand I think you could go either way. According to pub. 970, "If, after you file your 2009 tax return, you or someone else receives tax-free educational assistance for ... an expense you used to figure a tuition and fees deduction on that return, you may have to repay all or part of the deduction."

If you use the original amount from the 1098-T for the 2009 deduction, then the parents get the refund this year, for their 2010 return you would have to figure the difference between the original deduction, and what it would have been with the additional assistance, and report the difference on line 21, other income. (Pub. 970, p. 53) One problem with this is that they get a bigger refund this year and have it taken away next year. You could avoid that by using the smaller amount, as if they have gotten the money. On the other hand the parents haven't actually gotten the money yet. If they're sure that they will get the refund, I think I would go with the smaller amount for the deduction for 2009.

[MargaretMort]

That was my original thinking. Part of the problem is that this is such a new program that the VA, who is charged with paying the funds, and the colleges are playing catch-up. In this case, the university is reimbursing the parents, they just haven't received the money yet.

I already have the return completed, claiming only the un-reimbursed portion, but I was more than willing to re-do if necessary. I will go with my original thought.

Thanks for taking the time to respond. MM