Thursday, August 6, 2015


While the idiots in Congress have not passed any actual tax bills so far this year there have been some procedural changes tacked on to some non-tax bills.  Like the business tax return filing deadline changes in the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015”.

The “Bipartisan Congressional Trade Priorities and Accountability Act of 2015” includes a change in the documentation of education tax benefits.

Kay Bell explains in “Form 1098-T Will be Needed to Claim Education Tax Breaks” at DON’T MESS WITH TAXES -

Under the new trade preferences act, 1098-T information will have to match up with American Opportunity or Lifetime Learning tax credits claims.

Similarly, a Form 1098-T {“Tuition Statement” – rdf}  will be required to claim the above-the-line tuition and fees deduction, which actually expired at the end of 2014, but is expected to be renewed under pending extenders legislation.

Basically, if you don't have a valid 1098-T with the info you're putting on your return, the IRS will not accept your education claims. This effectively means that folks claiming education tax breaks will have to wait to file until they (and the IRS) get their Form 1098-T copies, delaying filing by folks who submit their returns early because they're getting big refunds.”

This change is effective for tax year 2016 – for tax returns filed in 2017.

My initial response to this new matching requirement concerns the fact that most Form 1098-Ts that I see during the tax season are as useful as tits on a bull.

I said as much in my 2012 post “Bull Tit”.

To quote from that post –

Box 1 of the 1098-T is for payments received ‘from any source’ for qualified tuition and related expenses.  This is the information I need.  However in the years that this form has been in use I have only seen an entry in this box once – and it was incorrect.  It showed only the payments received directly from the student (actually the student’s parents).

Box 2 is for amounts billed for qualified tuition and related expenses.  This is the box that is always filled in.  To be honest, I don’t care a rat’s hind quarters how much was ‘billed’.  My clients are cash-basis taxpayers – I need to know what was paid during the calendar year, not what was billed.

Colleges will generally bill students for the semester beginning in January of the following year at the end of the current year.  So the amount in Box 2 usually includes this amount.  But parents or students do not always pay this amount until the following year.”

As I point out in the post –

Thankfully some colleges and universities will provide a supplement to the Form 1098-T mailing that itemizes the various charges and payments made for the year by date, which is extremely helpful.  But unfortunately not all.”

I do not rely on the 1098-T for claiming education credits or deductions.  I instruct clients with children in college that “I need all Form 1098-Ts received and all the ‘Burser’s Reports’ for the year that show tuition and other payments.  You may be able to print-out a financial report from the college’s website.” 

Several years ago I was given a Form 1098-T for a student who had graduated in the tax year.  Box 1 and Box 2 were both empty.  Upon questioning the taxpayer I discovered that there were indeed payments made for qualified tuition and fees during the year.  These payments had been billed in the previous year, and were included in Box 2 of the previous year’s Form 1098-T.    
If the IRS is now going to match all Form 8863 and Form 8917 claims to the information reported on Form 1098-T is the IRS also going to require all educational institutions to properly complete Box 1?


1 comment:

Chris said...

The first thing I though of is, aren’t these the ones that sometimes come through with no dollar amounts in the boxes? Thanks for confirming that.

It makes sense, though. They have no employees so anything they can do with software and a computer is a target.