1098-T Form showing different amounts in TurboTax vs FreeTaxUSA - which is correct?
Hey everyone, just finished my degree last year and now tackling my 2024 taxes. I've filed on my own for years, but this situation has me completely stumped after like 5 hours of googling. So I entered all my tax info into TurboTax first, and everything was fine until I got to my 1098-T form. My refund immediately changed from getting back $12 to owing $1,430! On my 1098-T, box 1 shows $10,692 and box 5 shows $14,693. I'm guessing that means about $4,000 is taxable income? This seemed weird so I decided to try FreeTaxUSA with the EXACT same information. Their calculation shows I only owe $332 federal with a state refund of $165. I've literally started over from scratch on both systems to make sure I didn't mess up somewhere, and I keep getting the same results. I triple-checked every number I entered against my forms. Looking at the 1040 preview from both services, I noticed TurboTax is adding an extra $4,000 of income that seems to be from the 1098-T. FreeTaxUSA only shows my W-2 income. I'm seriously confused - which software is calculating this correctly? This is my first time dealing with education tax forms since graduating. I don't know enough about tax law to figure out which one is right. Has anyone else experienced this?
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Diego Mendoza
The difference you're seeing is almost certainly related to how each software is handling your scholarship/grant money (box 5) compared to your qualified education expenses (box 1). When your box 5 amount ($14,693) exceeds your box 1 amount ($10,692), the difference ($4,001) is considered taxable income. This is because you received more scholarship/grant money than you spent on qualified tuition and fees. TurboTax appears to be correctly adding this excess scholarship amount to your taxable income. FreeTaxUSA might not be properly calculating this portion, which explains the lower tax amount. Look at line 8s on the Form 1040 in both software packages - TurboTax should show the excess scholarship amount here, while FreeTaxUSA might not be including it. IRS Publication 970 specifically addresses this situation - excess scholarship money used for room, board, or other non-qualified expenses is taxable income.
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Anastasia Popova
•This makes sense, but I'm still confused about something. Does this mean I should be filing with TurboTax instead of FreeTaxUSA? Is TurboTax handling this correctly and FreeTaxUSA is wrong? I'm definitely not trying to pay more in taxes than I need to, but I also don't want to get in trouble with the IRS.
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Diego Mendoza
•TurboTax is handling this correctly based on IRS rules. When scholarship/grant money exceeds your qualified education expenses, that excess amount becomes taxable income - it's considered money used for living expenses, not education directly. You should use the software that correctly calculates your tax liability according to tax law, which in this case appears to be TurboTax. While nobody wants to pay more taxes, reporting incorrectly could lead to an IRS notice later requesting the unpaid tax plus potential penalties and interest.
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Sean Flanagan
After dealing with similar scholarship tax headaches last year, I discovered taxr.ai (https://taxr.ai) when I was trying to figure out why different tax services were giving me completely different results. Their system helped me understand exactly how my 1098-T was supposed to be reported. What's cool is you can upload your tax documents, and it explains what each box means and how it affects your taxes. It found a mistake in how I was reporting my scholarship income that saved me over $700! For your situation, it would instantly tell you which software is handling your 1098-T correctly.
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Zara Shah
•How exactly does this work? Do you just upload your 1098-T and it tells you if you're doing it right? I've been getting different results with different tax services too and I'm totally lost.
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NebulaNomad
•Sounds like another paid service trying to get money from confused people. How do we know this is any more accurate than TurboTax or FreeTaxUSA? Not trying to be rude, just skeptical of tax services that make big promises.
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Sean Flanagan
•You upload your tax documents and it analyzes them with its AI to explain what everything means in plain English. It points out potential issues or places where you might be missing deductions. For 1098-T forms specifically, it shows exactly how the scholarship/grant money should be handled. The difference is that it's explaining the tax rules to you rather than just calculating behind the scenes. So you can actually understand why there's a difference between TurboTax and FreeTaxUSA in your case, and make an informed decision. It saved me from making an expensive mistake on my scholarship reporting.
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Zara Shah
Just wanted to update - I tried taxr.ai with my 1098-T confusion and it was super helpful! Turns out I was incorrectly reporting my scholarship income like the OP's situation. The site explained exactly why the excess scholarship amount (when box 5 > box 1) needs to be reported as income. I was able to fix my return before submitting it. Also learned that I needed to include my scholarship income on line 8s of Form 1040, which my tax software wasn't making clear. Definitely recommend checking it out if you're confused about education tax forms!
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Luca Ferrari
When I had a similar issue last year with education credits, I spent literally DAYS trying to get through to the IRS for clarification. Kept getting disconnected or waiting for hours. Finally found Claimyr (https://claimyr.com) and watched their demo video (https://youtu.be/_kiP6q8DX5c) - they got me connected to an actual IRS agent in about 15 minutes. The agent confirmed that excess scholarship money (box 5 minus box 1) is definitely taxable income. She walked me through exactly how to report it correctly. Honestly thought it would be a waste of time but was shocked when they actually got me through to a real person who knew what they were talking about.
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Nia Wilson
•How does this service actually work? I don't understand how they get you through when the IRS phone lines are always busy. Do they have some special connection or something?
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NebulaNomad
•Yeah right. I've been calling the IRS for weeks and can't get through. No way this service can magically connect you. Sounds like a scam to me - pay money for something that should be a free government service? No thanks.
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Luca Ferrari
•They use a system that continuously redials the IRS for you and navigates the phone tree automatically. When they reach a live agent, you get a call connecting you directly. It's basically doing what you'd do manually but with technology that keeps trying. They don't have special access - they're just using technology to handle the frustrating part of calling the IRS. For me it was worth it because I needed to confirm my tax situation before filing, and trying to call myself was getting me nowhere. The time and stress it saved me was definitely worth it.
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NebulaNomad
I need to apologize and correct myself. After being super skeptical about Claimyr, I was desperate enough to try it yesterday after spending another 2 hours on hold with the IRS. Within 20 minutes, I was talking to an actual IRS representative who helped clear up my 1098-T questions. The agent confirmed that when scholarship money exceeds qualified education expenses, the difference IS taxable income that needs to be reported on line 8s. For anyone with 1098-T questions like the OP, this saved me from potentially filing incorrectly. I'm usually super skeptical of these services but honestly eating my words right now.
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Mateo Martinez
Just to add - I had the exact same issue between TurboTax and FreeTaxUSA last year. Turns out TurboTax was handling it correctly. The excess scholarship money (box 5 minus box 1) is considered used for living expenses like room and board, which makes it taxable income. It's super common for FreeTaxUSA to miss this calculation. I even called their customer service and they admitted there was an issue with how their system was handling 1098-T forms in some situations. They might have fixed it by now, but based on your experience, it sounds like they haven't.
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Chloe Harris
•Thanks for sharing this! Did you end up filing with TurboTax then? I'm leaning toward using them since they seem to be handling the 1098-T correctly even though it means owing more in taxes. Just wondering if there are any other differences I should be aware of between the two services?
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Mateo Martinez
•Yes, I ended up filing with TurboTax since they were calculating it correctly. It sucked paying more taxes, but better than dealing with an IRS notice later. One other difference I noticed was how they handled education credits. TurboTax was more thorough in determining if I qualified for the American Opportunity Credit vs. the Lifetime Learning Credit. They asked more detailed questions that helped maximize my education credits, which offset some of the extra tax from the scholarship income.
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Aisha Hussain
Friendly reminder that the difference in calculations shows why it's so important to understand the basic tax rules rather than just trusting software! For education expenses: 1. Box 1 on 1098-T = qualified education expenses paid 2. Box 5 on 1098-T = scholarships/grants received 3. If Box 5 > Box 1, that excess is TAXABLE income 4. This excess goes on Line 8s of Form 1040 as "Taxable scholarships not reported on W-2" This is covered in IRS Publication 970. Many tax software programs miss this or don't explain it clearly!
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Ethan Clark
•But what if my school reported amounts in Box 2 (amounts billed) instead of Box 1? My form has Box 2 filled but Box 1 is empty. How do I calculate if I have excess scholarship then?
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