Irs Audit
June 2nd, 2004
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Irs Audit
Question: What are my chances of IRS audit with 1098-T?
Let’s say my wife gets a 1099-T from her university with only 2 numbers: $17,000 billed (box 2) and $10,000 scholarship (box 5). There is a difference of $7000 that could have potentially been paid to the University and is deductible.
How would the IRS know if this was actually paid by me and was not the result of some other scenario? Do they get any additional information from the school and are my chances of being audited if I claim the full $7000 deduction?
Answer: The amount of any scholarships that is used for tuition and fees cannot be used for the education credits or deduction. HOWEVER there are some things that CAN be paid for with scholarship proceeds that are not qualifying tuition and fees for the credits or deduction. Books, equipment, living costs such as room and board in the dorms or apartment costs are all eligible costs for scholarships but don’t qualify for the credits or deduction.
At audit, your records will determine what is legit and what is not. Use your scholarships first for items that don’t apply for the education credits if at all possible. Then use the remainder for tuition and fees. Whatever tuition and fees are then paid out of your own pocket or with loan proceeds are eligible for the credits or deduction.
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