Previous Reliance on Tax Form May Require Amending Returns

Abstract

For the 2018 tax year, colleges will now be required to use the payments received method (Box 1) to report qualified higher education expenses paid by taxpayers on Form 1098-T, which is both furnished to the IRS and relied on by taxpayers when claiming education tax deductions and credits such as the deduction for qualified tuition and expenses, also known as the Tuition and Fees Deduction; the American Opportunity Tax Credit and the Lifetime Learning Tax Credit. While Form 1098-T provides relevant information, taxpayers and tax return preparers who have relied on Form 1098-T to claim these tax incentives in prior years may have underreported or overreported the payment of qualifying higher education expenses and limited their ability to claim a tax deduction or credit for qualifying higher education expenses incurred in the spring semester of the student’s senior academic year because of the popular use of the amounts billed method (Box 2) by most colleges and universities. This article confirms that those who may have relied on Form 1098-T to claim education tax deductions and credits may need to file amended tax returns using Form 1040X to claim additional education tax deductions and credits to which they were entitled.

Keywords: Lifetime Learning Tax Credit, Education Tax Incentives, Form 1098-T, Amending Returns

JEL Classification: H24, H21, K34