DEO Posted March 1, 2018 Report Posted March 1, 2018 Client's daughter received both a 1098-T and a 1099-Q. 1098-T Box 2 16,200-Amounts billed Box 5 15,959-Scholarship 1098-Q Gross distribution-14,100.00 Earnings-8,975.00 Basis-5,125.00 What is the appropriate/advantageous way to handle this so that TP can come out on top. Thanks for any assistance. Quote
Catherine Posted March 1, 2018 Report Posted March 1, 2018 First of all, get the Bursar's Office statement. What the 1098-T and the 1098-Q say do NOT match up. If a scholarship paid all but a couple hundred of "amounts billed" then why a gross distribution of $14,100? There is information missing here that is crucial. Does that "amounts billed" field only include costs NOT paid by the scholarship? Were education funds (529, Edu IRA, whatever) used to pay private housing instead of campus housing? Start there. Then we can help you figure out which payments qualify for what treatment, and if taking some of the 1098-Q money as taxable then makes the family eligible for credits. 4 Quote
Pacun Posted March 2, 2018 Report Posted March 2, 2018 9 hours ago, DEO said: Client's daughter received both a 1098-T and a 1099-Q. 1098-T Box 2 16,200-Amounts billed Box 5 15,959-Scholarship 1098-Q Gross distribution-14,100.00 Earnings-8,975.00 Basis-5,125.00 What is the appropriate/advantageous way to handle this so that TP can come out on top. Thanks for any assistance. Based on this information, there is no way the client will come out on top. Client can use $241 for an education credit and pay taxes on $14,100. OR client can pay taxes on the scholarship (if allowed) and use $2,100 for education credit. This is the situation, client applied for scholarship and at the same time went to his 529 plan administrator and asked for $14,100 to pay for education. Since the scholarship covered almost everything, they have a taxable transaction. 1 Quote
RitaB Posted March 3, 2018 Report Posted March 3, 2018 Can I interrupt this thread to say that education credits are the biggest time suck of my entire practice? They NEVER remember the Bursar's Statement. I have copies of a sample statement in my top drawer and pull one out as soon as I see the 1098-T. It's as if I pulled a unicorn out of my, ahem, left ear. The second biggest time suck is: "This is my W-2 (it's a 1099-R), this is my husband's W-2 (it's a 1099-R), this is my pension, this is my husband's annuity, this is this, and this is that, and here is my bank interest, I don't know it's enough to count (yeah, if you bring it to me it's going on the return), BBFB. (Blah, blah, freakin blah.) 5 4 Quote
RitaB Posted March 3, 2018 Report Posted March 3, 2018 I had one guy say, "Oh wow, what a coincidence. The lady I've been emailing at Jr's school is named Bursar." 1 9 Quote
Bart Posted March 4, 2018 Report Posted March 4, 2018 6 hours ago, RitaB said: Can I interrupt this thread to say that education credits are the biggest time suck of my entire practice? They NEVER remember the Bursar's Statement. I have copies of a sample statement in my top drawer and pull one out as soon as I see the 1098-T. It's as if I pulled a unicorn out of my, ahem, left ear. The second biggest time suck is: "This is my W-2 (it's a 1099-R), this is my husband's W-2 (it's a 1099-R), this is my pension, this is my husband's annuity, this is this, and this is that, and here is my bank interest, I don't know it's enough to count (yeah, if you bring it to me it's going on the return), BBFB. (Blah, blah, freakin blah.) I am so glad they TRY (even tho they get it wrong as Rita said) to tell me what the forms are. You know I have never seen any of those forms before. 4 Quote
Gail in Virginia Posted March 4, 2018 Report Posted March 4, 2018 That's why the clients that drop off the paperwork with a phone number where they can actually be reached (or even better, an email address!) are my favorites. Watching them open their mail and try to puzzle out what they have, and remember what they should have, while amusing is a HUGE waste of time. I can slit it open and throw away the envelopes in half them time, and I probably know more about what they are missing than they do if we have done their returns for a year or two. On the other hand, if they were good at this stuff they would not be paying me the (cough, cough) big bucks. 4 Quote
Randall Posted March 5, 2018 Report Posted March 5, 2018 On 3/1/2018 at 11:07 PM, Pacun said: Based on this information, there is no way the client will come out on top. Client can use $241 for an education credit and pay taxes on $14,100. OR client can pay taxes on the scholarship (if allowed) and use $2,100 for education credit. This is the situation, client applied for scholarship and at the same time went to his 529 plan administrator and asked for $14,100 to pay for education. Since the scholarship covered almost everything, they have a taxable transaction. Once the 1098T and scholarships are sorted out, the 529 money can be looked at. Other costs apply for 529 money besides tuition. And if any is taxable, only the earnings portion would be taxable. 3 Quote
Richcpaman Posted March 5, 2018 Report Posted March 5, 2018 On 03/03/2018 at 1:07 PM, RitaB said: Can I interrupt this thread to say that education credits are the biggest time suck of my entire practice? They NEVER remember the Bursar's Statement. I have copies of a sample statement in my top drawer and pull one out as soon as I see the 1098-T. It's as if I pulled a unicorn out of my, ahem, left ear. The second biggest time suck is: "This is my W-2 (it's a 1099-R), this is my husband's W-2 (it's a 1099-R), this is my pension, this is my husband's annuity, this is this, and this is that, and here is my bank interest, I don't know it's enough to count (yeah, if you bring it to me it's going on the return), BBFB. (Blah, blah, freakin blah.) I reach across the desk and take the entire stack from them.... "I can sort this stuff and talk about what is important, and put the stuff where it goes in the (unused) organizer instead of you trying to pull the *right* document out each time" Then I SMILE. Works like a champ. Rich 4 Quote
Pacun Posted March 10, 2018 Report Posted March 10, 2018 On 03/05/2018 at 6:02 AM, Randall said: Once the 1098T and scholarships are sorted out, the 529 money can be looked at. Other costs apply for 529 money besides tuition. And if any is taxable, only the earnings portion would be taxable. You are correct. Thank you. 1 Quote
Terry D EA Posted March 11, 2018 Report Posted March 11, 2018 <<<<<<<only the earnings portion would be taxable>>>>> I beg to differ here. Any portion of the distribution that is NOT used for educational purposes is taxable. Not just the earnings. I agree there appears to be some missing information here regarding what the 529 funds were actually used for. Once that is determined, then the distribution in excess of the educational expenses is taxable. Quote
Pacun Posted March 11, 2018 Report Posted March 11, 2018 Terry D, that's the way I was thinking but since that money was already taxed on the federal level, only the earnings should be taxable. In DC, if I put $3,000 on a 529 plan, I only get a break on the state return, not the federal, so I assume that I will have a basis on the 529 funds. Quote
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