Discussion:1098-T Negative Adjustment
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Discussion Forum Index --> Tax Questions --> 1098-T Negative Adjustment
| 6 September 2006 | |
| Client has a 1098-T with a negative number in box 3 "Adjustments made for a prior year".
How do I treat this? | |
| 26 September 2007 | |
| Old discussion, but no resolution. I've never had a 1098-T with this adjustment (2006 version shows this adjustment in Box 4). I've tried to find what to do with this - though I'd like to ignore it. The adjustment is for tuition on a former dependent. That is, T & F deduction taken on 2004 return when student was a dependent. In 2006, former student is no longer a dependent and we've got this adjustment to deal with on parent's 2006 return. I'm just not sure what to do with it. Any help? Thank you. | |
Ksnoopytax (talk|edits) said: | 26 September 2007 |
| Colleges are required to report adjustments to prior year tuition and fees if they occured in a subsequent year. These adjustments may have been in 2006 but relate to year 2005 and a decrease in the corresponding tax credit reported that year. To report the adjustment you are supposed to recalculate the prior year tax with the difference in your tax to be included in Line 44 of form 1040 with a notation of ECR next to the line to alert the IRS that you have a recapture of prior year's education credits. If you use Lacerte this is built the screen where you enter your education credit information.
Keep in mind that the 1098-T is for amounts BILLED to the student not necessarily paid. Taxpayers should use the amounts paid to calculate what the corresponding credit should be on their tax return. | |
| 26 September 2007 | |
| Good advice from Ksnoopytax. But good luck trying to reconcille what is on the 1098-T to reality. We have tried several times and it is unbelievable how often they are incorrect It is almost impossible to get anyone at the University to explain how they came up with the numbers. | |
| 26 September 2007 | |
| Thank you for this good information; I know I'll need it again sometime. Since the parents did not take a deduction/credit for this child in 2005, but did in at least 2004, I'm wondering (but not much!) what that means. I wonder who really prepares these forms and if they know what they're doing. Another side to this is if the original 1098-T showed $5,000 in qualified expenses and the deduction was limited to $2,000, there wouldn't be any difference in the previously filed return. Am I saying that incorrectly? Is it $1 for $1 reduction in the credit/deduction or a reduction in the qualified expenses? (Rhetorical) | |
| 26 September 2007 | |
| It is a reduction of the qualified expenses and yes, if there was no original tax benefit then no change is needed. | |
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