Client graduated from a 4 year college with a degree in May 2019. She received a 1098-T for tax year 2019 showing $575 in Box 1 (Payments Received) and $14,915 in Box 5 (Scholarships).
Because she was a full time student at a qualified educational institution this scholarship should not be taxable. But the difference between Box 1 and Box 5, which is $14,340, is showing up in line 1 of her 1040.
I have marked all the appropriate boxes but I'm unable to get the scholarship money from showing up as taxable.
Although the 1098T might be incorrect, you have to find out.
The form you have says her total tuition was 575 but she received 14915. That says it was taxable.
Did she already take credit for that tuition in the prior year?
I think you need last years return and the bursars statement for both years to see what was paid and when.
The program is handling the information you entered correctly. The 1098T must be corrected by the school. It is wrong!
From what you said box 1 should be the total of the scholarship plus the 575. If AOC eligible, your client should get 575 plus books and course related fees.
MAKE THEM FIX THE 1098T. So far this year, I have sent 2 students back to the bursars office and they are both being corrected.
FWIW, There are plenty of situations where scholarship money exceeds tuition and the excess money is given to the student to pay living expenses, buy a car, or whatever. That money is taxable income and is the reason PS is handling it the way it is.