Tax Dictionary – Form 1098-T, Tuition Statement

Tax Dictionary

Eligible educational institutions file Form 1098-T for each student they enroll and for whom a reportable transaction is made.

Insurers file this form for each individual to whom they made reimbursements or refunds of qualified tuition and related expenses.

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If you paid tuition to a qualified college or university, you should receive a Form 1098-T. This form shows the tuition paid to the school, the amount that was for qualified tuition and related expenses, the amount of scholarships and/or grants received, and any adjustments for prior years. The form also shows whether you were enrolled at least half-time and if you are a graduate student.

You will use this form to determine if you qualify for one of the education credits such as the American Opportunities Act Credit or the Lifetime Learning Credit. Some schools show an amount received in Box 1 and others show the amount billed in Box 2. If your school uses Box 2, be sure you have documentation to show how much you actually paid.

If the school does not show its federal identification number on the form or if the IRS does not accept your calculation of the education credit you claimed, the IRS will likely send you a CP2000, Underreported Income notice. This IRS notice will propose to disallow the credit and charge additional tax. This will reduce or eliminate your refund or may result in an unpaid balance due. You can respond to the notice and provide documentation to the IRS to prove that you do qualify for the credit. Learn how to handle an underreporter inquiry (CP2000).

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