I forgot to add my 1098-T from school on this year's refund. What will happen?
What will happen if you forgot to include your 1098-T information on your return? The answer is nothing. That's right, the 1098-T is for informational purposes only. It's not similar to a 1099 that must be reported. In fact, quite often, the information on the form does not correctly match how you should report tuition paid nor grants and scholarships received. The reason for this is that the schools go by an academic year and not necessarily a calendar year as would be presented on a tax return. The 1098-T does indicate your status as "at least part-time" or greater status. So it confirms your enrollment. Beyond that, you should always verify the amounts of tuition paid, whether by student loan, grant, scholarship or otherwise and in which calendar year. You can only deduct what you paid within that year. Conversley, you only have to subtract tax free grants and scholarships against those expenses paid in that calendar year. In this regard, you can allocate tax free assistance to the year in which it applies. This is besides other expenses and fees for books and supplies that you can always deduct. If you received more in tax free grants and scholarships than tuition paid as in the case of receiving scholarships for room and board which are not deductible, you could have taxable income. I mention this because some people are surprised when this happens. However, as frequently is the case, If you have net deductible expenses for tuition, books and fees paid for the current tax year, you have a tax deduction. And if you did not include those expenses when you originally filed your return, you can amend on form 1040X within three years of the due date. With an amendment, you would be applying for one of three educational deductions and credits contained within the American Opportunity Credit. The best one, and the one that's partially refundable, is the Hope Scholarship Credit. Partially refundable means that even if you do not have a tax liability for the year (your deductions exceed your income) you can still get money back - up to $1000. The credit against taxable income however is up to $2500. The requirement for this credit is that you are within your first four years of post-secondary education and have not already claimed four years of credits. The second is the lifetime learning credit for other categories of education including a masters degree program. The third is the tuition and fees deduction. This is a deduction from you gross income used to calculate your adjusted gross income or AGI. This can be beneficial if you have other itemized deductions that are limited due to you AGI being too high. You can compare which credit or deduction yields the highest benefit but generally the Hope Scholarship Credit, if you qualify, is the best. There is actually a fourth category for those people that pay for education to maintain or improve their job skills. These would be deducted as a business deduction for the self employed or as an itemized deduction for an employee. Again, you have to compare each deduction and credit method to see which yields the greatest benefit. Couple of other things to note here. If someone else is claiming you as a dependent, the tuition credits and deductions go on the return where your exemption is being claimed even if you paid the fees by loan or out of pocket yourself. The reverse is true as well. If someone else such as a parent or relative paid those expenses, the money is considered a gift that you in turn paid to the school and you claim them on your return if you are not being claimed as a dependent. Education Credits--AOTC and LLC