Up-to-the-minute advice, information, resources, and, on occasion, commentary on federal and New Jersey state income taxes, and the various New Jersey property tax rebate programs, and insights and observations on tax policy and professional tax practice, by 40-year veteran tax professional Robert D Flach.

“A
2015 law changes requires an individual to have received a Form 1098-T from the
university in order to claim the tax benefit.”

The purpose of this new requirement is to
enhance the IRS matching program.

Thankfully, the required 1098-T also must now include an entry in Box 1 to indicate
the amount of payments received “from any source” – basically by the student
(or the student’s family) or for the student (such as student loan proceeds) for
qualified tuition and related expenses during the calendar year. Previously most colleges only reported the
amounts billed – making the majority of Form 1098-Ts as useful at tax time as
tits on a bull.In preparing the tax
return I don’t give a rat’s hind quarters how much the college billed – I need to know how much was paid by or for the student.My clients are, after all, cash-basis
taxpayers.

However, the American Opportunity Credit is
based on qualified tuition and fees paid during the year, now properly reported
on the Form 1098-T, and required books
and supplies, which are not reported on the Form 1098-T.

The issue that Annette brings up goes like
this –

You cannot claim an American Opportunity
Credit for 2016 unless the college issues a Form 1098-T.If a student who is graduating in May of 2016
was billed, and paid for, Spring 2016 tuition (the student’s final semester) at
the end of 2015, then there will be no payments made to the college in 2016
and, I expect, no Form 1098-T issued for 2016.But the student will still be purchasing books for the Spring 2016
semester in 2016, an expense that is eligible for the AOC.It looks like the student will be screwed out
of a legitimate AOC for 2016, based on qualified book purchases, because no
Form 1098-T was issued.

Annette illustrates the problem with a
recent court case.

The problem would be fixed if colleges were
required to issue Form 1098-T for all students enrolled at a college at least
half-time during the year, regardless of whether or not any tuition or fees
were paid.

It also occurs to me that a matching
problem might also appear.Since
qualified book and material expense are not reported on a Form 1098-T the
amount of expenses, if less than the maximum $4,000, reported on the tax return
could be more than the amount reported on the Form 1098-T.An extra line on the Form 8863 to separately
identify tuition and fees per Form 1098 and nor-reported books and materials
would fix this potential FU.

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