… to file my taxes.
I get that money stuff can be complicated, but the vast majority of Americans will have to file a tax form at some point in their lives and we ought to be able to do it without hiring an accountant.
Eldest Son and Daughter are both to the point where they need to file tax forms (or at the very least they have to figure out if their income levels require them to file). Part of the filing process requires that they look at the amount of scholarship and grant income they’ve received and see whether any of it is considered taxable income. As the person in the house who has had the most experience filling out tax forms, it was up to me to determine this latter issue.
Eldest Son and Daughter each received a 1098-T, which shows “amounts billed for qualified tuition and related expenses” and the total of scholarships and grants received. According to the IRS, scholarships and grants used for tuition, fees, books, supplies and equipment for a degree program are considered nontaxable. Any scholarships or grants used for room and board are taxable.
Being new to this particular part of the tax code, I wasn’t sure how to tell whether room and board was included on the 1098-T. The IRS suggests calling the grantor or school to figure this out, so I placed a call to Eldest Son’s school first.
When I explained what I was trying to figure out (i.e. what of Eldest Son’s scholarships and grants was taxable), the response I got was, “You’ll have to call your accountant to figure that out.” I replied, “I shouldn’t have to call an accountant in order to do my taxes, especially since the IRS suggested I call the school.”
What’s amazing about my reply is that it was so contrary and I said it with ease. Normally, when I’m going to say something contrary, I’m a nervous, jangled Nelly because I don’t want to offend someone, but not this time. I wasn’t malicious when I said what I said, just forthright, which led to the person on the phone telling me that room and board were not included in the “amounts billed for qualified tuition and related expenses.” Also, scholarships and grants are applied first to qualified expenses, not to room and board. Aha! That’s exactly what I needed to know. When I called Daughter’s school, I got the same response.
This means that if scholarships and grants are equal to or lower than the “amounts billed for qualified tuition and related expenses,” then the entire amount of scholarship and grant income ought not to be taxable. (Am I correct in my assumption, accountants? Readers, if you have the same question, make the calls I did and ask your own questions.)
Honestly, for the amount of rigmarole I went through to get this question answered, particularly when I was told I should see an accountant for the answer, I’d say our tax code is too darned complicated and needs simplification.