Grad Student. Doesn't mean I understand a 1098-T.

February 8, 2015 1:34 PM

I have a taxes and graduate school-related question for you all! Obviously, you are not my tax advisor, but can you shed some light on a very strange situation and suggest whether or not it's worth seeking professional help?

I am a graduate student at a large university. I am also a TA/RA. This package means that I get my tuition waved, but not the other fees associated with attending a university (~$500). (My actual living expenses are paid via a TA/RA wage, which comes on a W-2. THAT part makes sense.)

However, when I look at my 1098-T, things are all kinds of screwed up. My amount billed by the school is only for the associated fees that come with attending a university and tuition is NOT included in this. Thus it totals ~$500. However, when I look at the "scholarships or grants" box, I see they HAVE listed my tuition reimbursement as part of my scholarships, which means that box is about $22,500. When I enter this information into my online tax return, it catapults my modest return into an extremely hefty amount owed, because, if you only look at this information, it looks like I got handed $22,000 in scholarships this year and was never charged tuition. My school's website says that they can choose not to report the tuition waived for TAs/RAs, and only report billed instead, but does not say anything about going on to list my waiver as scholarship money.

I have no idea how to reconcile these figures. Is this something where I can just enter the amount actually billed in tuition into the appropriate box instead? It's very very obvious from my school financial records what that amount is. Do I have to go try and straighten this out with the Bursar's Office? Is it worth pulling in a tax professional on?

Thanks for the guidance, Mefites!

posted by WidgetAlley to Work & Money (10 answers total)

I work at a university, and there are so many different ways that a student can be taxed all dependent on a lot of different things. Contact your departmental administrator. If he or she doesn't know the answer, he'll get you in contact with someone who does. There are people at your university whose job it is to explain this to you-- and fix it if it's wrong. Don't waste money pulling in an outside person-- you just need to find out what office this is, and your administrator probably talks with them at least once a week. (At my university, this would not be the Bursar's office.) Good luck!
posted by veryhappyheidi at 1:50 PM on February 8, 2015

Unfortunately tuition waivers over $5,250 are treated as taxable income. Definitely talk to someone on campus to clarify it, but this is a huge bummer that nobody ever warns grad students about. Changing the amount billed shouldn't change the amount you owe taxes on (try it for yourself).
posted by one_bean at 2:02 PM on February 8, 2015

Response by poster: Okay, I've done some more digging and it looks like the REAL problem is that I switched from a fellowship to a TA in the middle of the financial year last year.

So my spring 2014 tuition was billed in 2013. My fellowship money to COVER that tuition awarded actually IN spring 2014, however, and since I switched over to a tuition waiver in Fall 2014, I didn't get billed for tuition at all in 2014. So, since spring 2014 tuition was billed in 2013, it still looks like I just got handed a lump sum, which I emphatically did not. Any ideas on how to bridge the calendar year gap problem of billing/funding?

Unfortunately tuition waivers over $5,250 are treated as taxable income.
I did see that on Google, but I also found several mentions that this is not true for certain types of students, which I'm pretty sure I fit under, and also moving the amount billed around definitely changes the amount I owe.
posted by WidgetAlley at 2:24 PM on February 8, 2015

I seem to remember this same thing happened to me (fellowship and TA money being treated differently) and the answer was just that I was hosed. I owed an unexpectedly big tax bill one year, when the difference broke against me, and then got a refund in a later year when the difference worked in my favor. This was quite a while ago so I'm not sure if anything has changed or if your situation has relevant particulars that would make it different. But it's possible the answer is just the unhappy one; I would definitely talk to your department admin person and maybe to second year grad students who will have just gone through this same thing last year.
posted by LobsterMitten at 2:57 PM on February 8, 2015

It would be worth it to pay for an hour of an accountant's time to clarify this issue for you, as the tax penalty for having it count as income would be significantly more than that ($2,250 if your marginal rate is 10%). However, IRS Publication 970 (which is the one I consulted back when) would suggest it should be tax-free and you should be able to write it off:

http://www.irs.gov/publications/p970/ch01.html

A scholarship or fellowship is tax free only to the extent:

It does not exceed your expenses;

It is not designated or earmarked for other purposes (such as room and board), and does not require (by its terms) that it cannot be used for qualified education expenses; and

It does not represent payment for teaching, research, or other services required as a condition for receiving the scholarship. (But for exceptions, see Payment for services, later.

So it's POSSIBLE that your university is using a screwed-up accounting method that runs afoul of the last condition, but that wouldn't be the case most places (it wasn't how my taxes worked where I went, for instance).
posted by gerryblog at 4:52 PM on February 8, 2015

Best answer: DM if you want to talk with more specificity about it. I'm no expert, but I was a grad student for a long time and had a bunch of different tax situations over the years as a result.
posted by gerryblog at 4:53 PM on February 8, 2015

Okay, sorry, one more pair of links:

http://www.irs.gov/pub/irs-lafa/103901f.pdf

A tuition waiver for graduate level courses offered to employees of an educational
institution, as described in I.R.C. § 170(b)(1)(A)(ii), is excludable as a qualified tuition
reduction only if the recipient of the waiver is a graduate student engaged in teaching or research activities for the institution. I.R.C. § 117(d) provides that any qualified tuition reduction is excludable from gross income. A qualified tuition reduction is the amount of any reduction in tuition provided to an employee of an education institution for education below the graduate level at such organization. I.R.C. § 117(d)(2). However, in the case of graduate students who are engaged in teaching or research activities at the educational institution, tuition reduction for graduate level education is considered a qualified tuition reduction.

and

http://www.law.cornell.edu/uscode/text/26/117

Gross income does not include any amount received as a qualified scholarship by an individual who is a candidate for a degree at an educational organization described in section 170 (b)(1)(A)(ii).


So if I understand the situation you're facing correctly I would be very skeptical of any conclusion that has you on the hook for this tuition reduction as income. I think you're in the clear and the only relevant number for your tax purposes is -$500. But if you're still worried an hour with an accountant would put your mind at ease about it.
posted by gerryblog at 5:02 PM on February 8, 2015 [1 favorite]

Best answer: Honestly, no one at my university ever understood how this worked, and it seemed like everyone did something slightly different. It is wonderful if your departmental administrator or someone at your university will actually help you...that suggestion actually made me laugh out loud because my university was so utterly unhelpful with this. I even went so far as to go to H&R Block and talk to someone in person, and they were still mystified. It's ridiculous that the form is so complicated that PhD students literally cannot figure it out the extent that they are certain they are filling it out correctly.

For what it's worth, what I have done in the past is just enter in the amount I actually got NET of tuition/fees/etc. into the box in Turbo Tax, and paid taxes on that. It sounds like you maybe didn't have any fellowship money in excess of that, in which case I would enter "zero". I'm not 100% sure that's correct, but this is what I (and several classmates) did in grad school.
posted by rainbowbrite at 7:09 AM on February 9, 2015

Best answer: I'm not sure if this will be helpful for you, but I had a 1098-T issue this year as well - schools only have to fill out one of boxes 1 and 2, either amount you paid or amount they billed. This can apparently cause trouble because often they bill in one year (e.g. in last 2013 for tuition for Spring 2014) and you pay the next year (so you/your scholarships pays in 2014). But, your taxes are concerned with how much YOU paid (and that includes scholarships/whatever) in the relevant calendar year (the amount your school bills you is basically just a shortcut to get this information). So there should be a way to enter this as tuition you paid that isn't reported on your 1098-T (not sure if you're using software or what, I used Turbotax and was able to handle all this after I spent some time googling around).

So, this should even out the amount you "paid" and the amount of your reimbursement.


I am not a tax preparer or lawyer or anything, so be sure to take all this with a grain of salt, but this is my understanding from the issue I had. Yours might be more complicated.
posted by little beast at 10:17 AM on February 9, 2015

Response by poster: Hi everyone,

Thanks so much for all your help! gerryblog over MefiMail, little beast, and rainbowbrite were all on the right track. After a LOT of intense Googling, I did find the section in Pub 970 where the IRS says that they only care about tuition and qualifying expenses PAID for the tuition deduction. The problem was that almost all the other information and the way most tax programs are set up are concerned with the actual education credits (Lifetime & American Opportunity), which care about the amount BILLED. Which is what my 1098-T says. Since I can't take any ed credits, the information on my 1098-T is almost completely irrelevant.

So what I'll have to end up doing is filing an addendum to last year's taxes, owing a tiny bit on last year, and then filing THIS year's, and owing a very modest amount on the excess fellowship above tuition and other qualified costs. This is much more in line with what I expected! Thanks to you guys, I will not be paying an extra $1500 (!!!!!) on my taxes this year.

It is wonderful if your departmental administrator or someone at your university will actually help you...that suggestion actually made me laugh out loud because my university was so utterly unhelpful with this.

I laughed a bit too. My departmental administrator was very kind and supportive and helped me comb through IRS documents, but the only prior knowledge they had was, "Oh, yeah, this has happened to students before and it totally sucks." I am now working with them and my approach rep to try and get this put into the institutional knowledge somewhere so no one else encounters this problem in the future. Thank you all so much!
posted by WidgetAlley at 9:59 AM on February 10, 2015