1040EZ Tax Form - Download as DOC by kah14731


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									Student Accounts - Graduate Summary
1098-T tax statements

       Do I pay taxes on this amount? Does it have something to do with my earnings? No.
       The information on the IRS form 1098-T is issued to assist those eligible to claim a
       nonrefundable credit against their Federal income tax for the payment of certain
       postsecondary educational expenses.

       There are three tax credits related to the 1098-T: Hope Scholarship Credit and Lifetime
       Learning Credit (claimed using IRS Form 8863), and an ‘above-the-line’ deduction
       (claimed using IRS Form 1040/1040A). You can only claim one of these each tax
       reporting year.

      What are the Hope Scholarship and Lifetime Learning Credits?
        These are tax credits to help you offset the costs of higher education by reducing the
       amount of your income tax. A tax credit reduces the amount you may have to pay (unlike
       a deduction which reduce the amount of income subject to tax, a credit directly reduces
       the tax itself). The credit is limited by the amount of your income and the amount of
       your tax.

      What is the difference between these two credits? There are eligibility differences and
       only one may be claimed each year.

  Hope Credit                                      Lifetime Learning Credit
  Up to $1,500 credit per eligible student         Up to $2,000 per return
  Available ONLY until the first 2 years of        Available for an unlimited number of years of
  post-secondary education are complete            postsecondary education and for courses to
                                                   acquire or improve job skills
  Available ONLY for 2 years per student           Available for an unlimited number of years
  Student must be pursing an undergraduate         Student does not need to be pursing a degree or
  degree or other recognized credential            other recognized credential
  Must be enrolled at least half time              Available for one or more courses
  No felony drug conviction                        Felony drug conviction rule does not apply

      For graduate students, it is more likely that the Lifetime Learning Credit will apply.
       Lifetime Learning
           o Restrictions - you cannot claim the lifetime learning for 2003 if any of the
              following apply:
                   Your filing status is married filling separately
                   You are listed as a dependent on another’s tax form
                   Your modified gross income is $51,000 or more ($103,000 joint)
                   You (or your spouse) were a nonresident alien for any part of 2003 and the
                      nonresident alien did not elect to be treated as a resident alien for tax
                   You claim the Hope credit or take an above the line deduction.
                  No double benefits are allowed. If higher education, for example, is listed
                   as a business expense on your tax form you cannot claim the credit. You
                   cannot claim the credit based on qualified tuition paid with tax-free
                   scholarships, fellowships, grants, or employer-provided educational

       o You can claim a lifetime learning credit for qualified education expenses paid
         with the proceeds of a loan.
       o The amount of the lifetime learning credit is 20% of the first $10,000 of qualified
         education expense paid. The maximum claim amount in 2003 is $2,000.
         However, the amount may be reduced by your modified gross income.
       o You can claim the credit on IRS form 8863.

   What is the ‘above-the-line deduction’? There is a tuition and fees deduction you may be
    able to claim on your 1040, line 26, or 1040A, line 19. The tuition and fees deduction
    can reduce the amount your income subject to tax by up to $3,000.
        o The max amount goes up to $4,000 in 2004. The deduction may be a benefit to
            you if you cannot take either the Hope or Lifetime Learning credit because your
            income is too high.
        o The tuition and fees deduction is available for 4 years, 2002 through 2005.
        o You cannot claim the tuition and fee deduction if any of the following apply:
                 Your filing status is married filling separately
                 Another person is claiming an exemption for you as a dependent
                 Your modified gross income is more than $65,000 ($130,000 joint)
                 You were a nonresident alien for any part of the year and did not elect to
                    be treated as a resident alien for tax purposes
                 You claim a Hope or Lifetime Learning credit.

   What charges are being reported to the IRS? Eligible charges are limited to tuition and
    certain mandatory fees, like the Student Government fee and the Transcript fee.
    Expenses that do not qualify include insurance, medical expenses (including any
    mandatory student health fee), room and board, transportation, hobby courses, or any
    living and personal expense – even if they are mandatory.
        o Because of these exclusions, the regulations required that we un-bundle from your
            tuition charge the student health plan fee in our reporting of eligible charges.

   Why did we file this form with the IRS? Princeton must file a 1098-T form for every
    student we enroll from whom a reportable transaction is made. The requirement started
    with the 2002 tax reporting, however we were only required at that time to report student
    information, not financial, in order to give institutions time to align themselves for the
    new reporting. There are reporting exemptions; however, institutions may still report
    these students. This year, Princeton has elected to report all students with reportable
        o Some reporting exemptions include:
            o Non resident aliens, unless requested by the student
            o Those whose tuition is entirely waived or paid entirely with scholarship
              o Those enrolled students taking course for which no academic credit is offered.

      Only eligible charges actually paid by the taxpayer to an eligible institution are
       considered for any of these tax credits.

      The 1098-T reflects the amounts billed for what the IRS has defined as eligible charges,
       and includes any scholarships, grants, or fellowships processed on your Student Account.
       Next year, we are required to report any adjustments we may make to the amounts

      Tax credits are based on the actual amount you paid towards these charges during the
       calendar year. Since Princeton allocates payments to your ‘account’ rather than making
       charge specific allocations, it is not possible to accurately report amounts paid just for
       these eligible charges. Therefore, we’ve elected to report amounts billed. If you qualify
       for an educational tax credit, you should refer to your personal records and Student
       Account statements to determine the amounts that you actually paid towards the eligible
       charges reported on the 1098-T.

Summarized by:
Maria Bizzarri
Bursar and Director of Loans and Receivables
February 11, 2004

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