Confused about 1098-T form showing $0 in box 1 but thousands in box 5 for scholarships?

This is a common issue with 1098-T forms that confuses a lot of people. Your university is using what's called the "billing method" rather than the "payment method" for reporting on the 1098-T. Before 2018, schools could choose which method to use, but now they're supposed to use the payment method. However, some schools are still catching up with this change. Here's what's happening: Since your tuition was billed in December 2022, but paid in January 2023, the university didn't include that payment in Box 1 for 2023 because they're still using the billing method. They're considering it a 2022 qualified expense (even though you paid in 2023). You're actually correct in your understanding - the form SHOULD reflect when the payment was received by the university. When FreeTaxUSA asks if you paid any tuition in 2023 that was billed in another tax year, you should absolutely say yes and enter the amount you paid in January 2023. This is the software's way of correcting for universities that are using the outdated reporting method. This won't cause problems with the IRS because you're actually reporting it correctly based on when you made the payment. Keep your payment records and statements showing the January 2023 payment date in case there are any questions, but this is a legitimate adjustment to make.

I had the exact same issue last year trying to file my taxes! My university also put $0 in box 1 and a scholarship amount in box 5, and it was driving me crazy because I KNEW I had paid tuition that year. I ended up spending hours trying to figure out what to do. After going back and forth with my school's financial aid office, I discovered an awesome service called taxr.ai at https://taxr.ai that specializes in exactly these types of education tax forms and scholarship situations. I uploaded my 1098-T and my payment statements, and their system analyzed everything and gave me the exact instructions on how to correctly report it. They explained that Box 5 scholarships are only taxable to the extent they exceed qualified education expenses, so even though my box 1 was $0, I could still claim those expenses I paid in January. The service showed me exactly what to enter in my tax software to make sure I got the proper education credits. Saved me a ton in taxes and gave me so much peace of mind!

Just wanted to follow up here. I ended up trying taxr.ai and it was actually really helpful! I uploaded my confusing 1098-T form and my university payment statements, and it broke everything down clearly. The system explained exactly how to enter my January 2023 payments even though they weren't in Box 1, and showed me how it affected my American Opportunity Credit. It even flagged that one of my course material expenses was eligible that I hadn't considered. Ended up increasing my refund by about $2,500! What I liked best was that it showed me exactly what to enter in FreeTaxUSA, screen by screen, so I didn't have to switch tax software. Definitely recommend it if you're dealing with this weird 1098-T situation.

I've been through 1098-T hell for THREE years now with my kid in college. What made it worse was trying to get answers from the IRS - I couldn't get anyone on the phone for WEEKS. Finally discovered Claimyr at https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c and thought it was too good to be true. But holy crap, it actually worked! They got me connected to an IRS agent in like 30 minutes instead of waiting on hold for hours or getting disconnected. The agent confirmed exactly what to do with my situation (which was similar to yours - Box 1 was empty but I had paid tuition). The agent walked me through exactly how to claim the education credit properly even though the 1098-T was filled out weirdly by the university. I had been leaving thousands of dollars on the table in previous years because I was afraid of claiming education expenses that weren't in Box 1. Such a relief to finally get a straight answer from an actual IRS person!

I need to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it anyway because I was desperate to get an answer about my own 1098-T situation (different college, same box 1 = $0 problem). The service actually worked exactly as advertised. I got a call back in about 45 minutes, and I was connected to a real IRS agent. I could tell they were legitimate because they had access to my previous tax returns and could see specific details about my filing history. The agent confirmed I should enter my qualified education expenses for the year I actually paid them, regardless of what the 1098-T shows in Box 1. She explained that many universities report incorrectly and that I was right to be claiming the expenses based on when I paid them. Saved me hours of waiting on hold and potentially thousands in education credits. Apparently this Box 1 issue is super common and the IRS is well aware of it.

I worked in a university bursar's office for 8 years and can tell you this happens ALL THE TIME. The issue is that colleges often bill for spring semester in November/December of the previous year, but students don't actually pay until January. The IRS changed the rules in 2018 to require reporting based on when payment was RECEIVED, not when it was billed, but many schools' systems haven't fully updated. The key is looking at your actual payment date. If you paid in January 2023, that's a 2023 qualified education expense, period. Your tax software is correctly asking if you paid expenses in 2023 that were billed in another year - that's EXACTLY your situation. Also, don't forget that textbooks and required course materials are qualified education expenses too, even though they don't show up on the 1098-T at all. Keep those receipts!

Has anyone else noticed that their tax refund changes dramatically when entering the 1098-T information? When I first entered mine (also with $0 in box 1), my refund went DOWN by $2800! Then when I added my actual payment date and amount for spring semester, it went back UP by $3000. This is confusing as hell.