Taxpayer asks:
I hope you can suggest a course of action for what I believe is a 1098-T form error. The college is a public college. The 1098 provided does include the following items: Tuition, Activity Fee, Technology Fee, and College Fee. I have read IRS Pub 970 several times and in particular pages 34 & 35 (Qualified and Non-Qualified expenses). There are additional fees on the bill which I believe are Qualified but not included. These fees are called:
1. Lab Fees,
2. Performance Lab Fee
3. Campus Service Fee
4. Athletic Fee
5. Applied Music Fee
Together they add up to roughly $1300. The Music Fee is $1100 and is described on the school’s website as “A mandatory fee per semester will be charged to all music majors and music minors registered for private lessons and master classes”. The school has told me this fee is not included because it is a fee unique to Music students at this college within the state’s university system.
What options may I have so to include these fees in my tax return as qualified? What are my risks if I were to report higher qualified tuition & expenses than appear on the 1098-T? I do understand there is a max. for the deduction but the current figure on the 1098-T is below this maximum.
Thanks in advance for any words of advice you can provide.
Taxgirl says:
Great question!
Without knowing your entire situation, it’s hard to give you a firm answer on this one. But here’s my best attempt:
The form 1098-T is the form that a higher education facility uses to report qualified educational expenses to the IRS for purposes of determining your eligibility for credits (the Hope Credit and the Lifetime Learning Credit). The form is not considered indicative of all qualified expenses and is not meant to be attached to your tax return.
For purposes of determining eligibility for these credits (which are also dependent on your income), qualified expenses do not include room and board, insurance, transportation, or other personal expenses. They may include fees for books, supplies, and equipment if the fees must be paid to the school for the student’s enrollment or attendance.
Examples of traditionally eligible expenses include tuition, special class fees, and music fees.
Examples of traditionally ineligible expenses include late charges, returned check fees, processing fees, student center fees, sports/recreational fees, room and board, dining, and service charges.
The amounts reported on the form 1098-T may also be reduced by grants, scholarships, refunds, and waivers received. Additionally, the credit can only be applied for amounts actually paid, and not simply billed, no matter what your form 1098-T reports.
Without knowing much else about your school, your requirements, your income and the like, I would surmise that fees for items 1, 2 and 5 would be includable but items 3 and 4 would not.
Your risks are similar to any other deduction with respect to over-deducting. If you believe that you can properly include those fees, then do so. Make sure that you keep well-organized documentation of the expenses and fees to back up your claims. If at audit or assessment, those fees were ultimately denied, you would be responsible for the tax attributable to those credits as well as interest and penalty.
I hope that helps.
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
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