AOL for tuition paid in advance?

[MN dhawk]

Kid graduates in May of 2011. The 2011 1098T shows no tuition paid or billed and 7K in scholarships. The 2011 tuition of 16K was paid in December 2010 as the school requested and showed up on the 2010 1098T. I have a bad feeling here. Can client take the AOL for 2011 or did he pay the school two weeks too soon? Thanks.

[Pacun]

By definition (according to the IRS), 1098s are not accurate and you must keep prove of payments. If you have proof of payment and enrollment, you should claim the credit in the year the classes were taken not when paid.

[jainen]

>>claim the credit in the year the classes were taken not when paid<<

I disagree. According to Section 25A(g)(4), "If qualified tuition and related expenses are paid by the taxpayer during a taxable year for an academic period which begins during the first 3 months following such taxable year, such academic period shall be treated for purposes of this section as beginning during such taxable year."

In other words, when PAID, not when used. The 1098-T was correct.