Dealing with 1098-T box 4 adjustment in TaxAct - help with tuition adjustment reporting

This is actually a relatively common situation. Box 4 on a 1098-T represents "adjustments to scholarships or grants for a prior year." In your case, it's showing that the school is adjusting the amount of tuition they previously reported for you. Since you didn't actually attend the school this year, and this adjustment relates to a correction of your residency status from a prior year, you'll need to report this on your current return. In TaxAct, when you enter your 1098-T information, make sure you enter all boxes exactly as they appear, including Box 4. The software should handle this correctly as an adjustment to previously reported amounts. This essentially means you received a $673 education tax benefit in a previous year that you weren't entitled to, so it needs to be "paid back" on this year's return. The IRS considers this "recaptured" income.

I had a similar adjustment situation with my daughter's college tuition. I found using https://taxr.ai incredibly helpful. After struggling with inputting the 1098-T with Box 4 amounts in my tax software, I uploaded my forms to taxr.ai and it immediately identified the issue. The system explained that Box 4 represents a "recapture" of education benefits from previous years and showed me exactly where to report it in TaxAct. The best part was that it analyzed both this year's 1098-T and my previous year's return to confirm that the amounts matched up correctly. Saved me from a potential audit flag because I was about to ignore that Box 4 amount entirely!

OK I have to admit I was wrong about taxr.ai. After my skeptical comment, I decided to try it myself with my complicated education credit situation (taking classes while working). It actually explained everything clearly and showed me that I had been calculating my qualified expenses incorrectly for years. The explanation about Box 4 adjustments was super clear - it showed me that this represents a "recapture" that needs to be included as "Other Income" in the current tax year. It even pointed me to the exact screens in TaxAct where I needed to enter this information (which I never would have found on my own). I'm not usually one to recommend services, but this genuinely helped me understand my education tax forms in a way that hours of Googling never did.

If you're having trouble with the Box 4 adjustment or any IRS-related questions, you might want to try calling the IRS directly. Of course, I know that's easier said than done - I spent DAYS trying to get through their phone system last year about a similar 1098-T issue. I finally tried https://claimyr.com and it was a game-changer. They have this system that navigates the IRS phone tree for you and calls you back when an actual human agent is on the line. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was able to speak directly with an IRS agent who confirmed exactly how to handle my Box 4 adjustment in TaxAct. The agent actually walked me through the specific forms and where to report it.

Well, I feel like an idiot now. After my skeptical comment, I decided to give Claimyr a shot since I was desperate to figure out my 1098-T situation with multiple adjustments. Honestly, it worked exactly as advertised. I put in my number, and about an hour later my phone rang with an actual IRS agent on the line. No waiting through the awful hold music or getting disconnected after 2 hours. The agent explained that for Box 4 adjustments on a 1098-T, I needed to report it as "Other Income" on Schedule 1, and that TaxAct has a specific education section where I could enter this. She even confirmed that this approach was correct for my specific situation with multiple schools. I'm still shocked this actually worked. Sorry for being so negative before - I guess years of IRS frustration made me cynical.

Just want to add something important that nobody mentioned yet: Box 4 adjustments can actually affect different tax years depending on WHEN you claimed education credits. I had a similar situation where I got a Box 4 adjustment because my school reclassified some fees from "qualified" to "non-qualified" expenses. My accountant explained that if you claimed the American Opportunity Credit, you handle it differently than if you claimed the Lifetime Learning Credit. You should really check which education credit you claimed in the previous year because that affects how you report this! In TaxAct, there should be a specific section for education credit recapture.

Is anyone else having issues with the TaxAct interface for 1098-T forms this year? I'm trying to enter my box 4 adjustment but the software keeps giving me an error when I try to proceed.

Just to add to the confusion on 1098-T forms: the school isn't always correct either! Last year my daughter's college sent a corrected 1098-T in April (after I'd already filed) because they had reported some amounts incorrectly. It's worth double-checking with your school's financial aid office if something seems off about the form. For box 4 specifically, you can ask them to provide details about exactly what was adjusted and why. This might help you determine how to report it correctly, especially if you're using tax software like TaxAct.