How to File a 1098-T on Your Tax Return

Filing a 1098-T form is a crucial step for students and parents navigating education-related tax benefits. This IRS form, provided by educational institutions, reports tuition payments and related expenses, potentially qualifying taxpayers for credits like the American Opportunity Credit or Lifetime Learning Credit.

Confirming Enrollment and Expenses

Verify that your educational institution has accurately reported your enrollment status and expenses on the 1098-T form. This document, issued by colleges and universities to students who paid qualified tuition and related expenses during the tax year, directly impacts your eligibility for education tax credits. Institutions report either the amounts billed or payments received for qualified tuition and related expenses. Cross-check the reported figures with your records, such as bank statements or receipts, to ensure accuracy and avoid complications when claiming tax credits.

Educational institutions must provide the 1098-T form to students by January 31st each year. Review the form carefully, focusing on Box 1, which reflects payments received for qualified tuition and related expenses. Note that Box 2, which previously reported amounts billed, is no longer used. Accurate records of payments made throughout the year are essential to confirm the information provided.

Filling Out the Student Information

Completing the student information section on the 1098-T form accurately is critical for IRS processing. This section includes the student’s name, address, and taxpayer identification number (TIN), often the Social Security Number (SSN). Ensure this information matches the records held by your educational institution to avoid delays or issues with tax credit eligibility. The IRS uses this data to verify the student’s identity and enrollment status.

If the student has changed their name due to marriage or other reasons, confirm that the name on the 1098-T matches their Social Security card to avoid discrepancies. Inconsistent information could flag the return for scrutiny, potentially delaying processing or triggering an audit.

Reporting the Payment Amount Boxes

Understanding the payment amount boxes on the 1098-T form is key. Box 1 reflects the total payments received for qualified tuition and related expenses during the tax year. These payments may include scholarships, grants, and other financial assistance received by the institution on the student’s behalf.

Qualified expenses typically include tuition, mandatory fees, and materials required for enrollment or attendance. However, costs such as room and board, insurance, or transportation do not qualify. Refunds from the institution may reduce the payment amount reported, which can affect the calculation of tax credits.

Submitting With Your Tax Return

Once you’ve reviewed and verified the 1098-T form, integrate the data into your tax return. Use it to calculate potential tax credits like the American Opportunity Credit (AOC) or the Lifetime Learning Credit (LLC). The AOC offers a maximum credit of $2,500 per eligible student, with 40% refundable, while the LLC provides a non-refundable credit of up to $2,000 per return.

Complete Form 8863 to claim education credits, ensuring that the amounts align with your 1098-T and any supporting documentation. Tax software can simplify this process by guiding users through the required entries. Accuracy is essential to avoid IRS scrutiny.

Documentation for Potential Audits

Maintain thorough documentation to prepare for potential audits. Retain all records supporting the information reported on your 1098-T form, such as tuition statements, detailed billing records, and proof of payment like bank statements or canceled checks.

Keep records of any scholarships, grants, or financial aid received, as these affect the calculation of qualified expenses. While the 1098-T form provides a summary of tuition payments, additional documentation can substantiate your claims if discrepancies arise. Store these records securely for at least three years from the date you file your tax return, as this is the typical period during which the IRS may initiate an audit. Comprehensive documentation can expedite the audit process and provide peace of mind.