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@HOPE2 wrote:

@TaxGuyBill Thanks a lot

I have two forms in hand. Each form should be entered into ProSeries one by one. What should I do for the first 1098-T that has an amount in Box 1 ($660)?

And what should I do with the second one, which one has box1( $12600) and box 5 ($19500)?

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Enter them on the parent's tax return.

Then on the Student Info sheet, scroll down about 1/3 of the way to Part V.  I have a hard time remembering exactly what to do, but I fiddle with the numbers on lines 4 or 7 to get the number I want (although maybe there is a better way to do it).  It just tested it and if you enter $9260 (the total tuition, minus $4000), it will allocate $4000 to the American Opportunity Credit (assuming they qualify for it).

On the student's return, you can enter a 1098-T with $0 for tuition and $10,240 of scholarships ($6,240 of excess grants plus the $4000 the parents are claiming).  That will add $10,240 of taxable scholarships to the student's return.

Let the clients know it is possible the IRS could send a notice asking about it or trying to deny the credit.  I don't think it happens often, but it sometimes does.  If the notice does come, just respond that the much of the Pell grant was used for non-tuition, which allows the parents to claim $4000 of tuition expenses for the American Opportunity Credit.