Getting a karmic education about poking fun at the tax troubles of others

Yesterday I was yukking it up here about the failure of several Obama appointees to properly pay all of their taxes. Thus inspired, I thought I'd finish preparing the Curmudgeon family tax returns.

As a good Catholic, I guess I'm not supposed to believe in karma -- but I don't know what else to call my encounter yesterday with the 1098-T.

I am not a tax lawyer. I've always made it a point of pride, though, to do my own personal taxes. It shouldn't be that hard: I spend more than I make, own little and owe much. There are no trust funds or capital gains issues in the Curmudgeon household. More's the pity.

Also, I use Turbo Tax. That means I "do" my taxes by plugging in numbers like a robot when prompted by the software. This is sometimes referred to as the 'plug and chug' method. Even then I can get into trouble... as I did yesterday.

Middle Son and Younger Daughter are both in college. That means I receive from 1098-T's from both their schools. This apparently has something to do with the tuition the schools charge and the tuition that I actually paid -- but, as I learned yesterday, it doesn't actually reflect either one.

Turbo Tax asked a seemingly innocuous question about whether all the expenses shown in Box 2 on the 1098-T were 'qualified.' I don't remember the exact question now. It was a question sufficient, however, to derail me from the safe plug and chug track. I wasn't so desperate as to consult the IRS 1040 Instructions (now there's 161 pages of scintillating reading to warm those cold winter nights!) but I did feel obliged to pull out the kids' tuition bills and see if I could figure out where the numbers on the IRS form came from.

We'll use Younger Daughter's 1098-T as an example. Since she's a freshman, I paid only one semester's worth of tuition for her in 2008. The 1098-T issued by her school showed some $12,000 in box 2. You might think, therefore, that something on that first semester bill would correspond to the number disclosed by the school on the 1098-T. The 2008 tuition bill, though, showed a total amount due of around $15,000 for tuition. To this were added various fees for room, board, activities, proclivities and general tendencies. Offsetting this figure were several credits. One was a 'scholarship' for having graduated from a Catholic high school. Another may have been issued for successfully fogging a mirror. I could sort of figure out what the loans were... but was this line -- called a 'grant' -- a loan or a scholarship? What about that one? The only thing that was abundantly clear on this statement was the sum that the school expected me to pay.

Anyone who has sent a kid to college in recent years knows about FAFSA. That's the 'free application for federal student aid.' Essentially, in the FAFSA you disclose everything you currently have, might have, and someday hope to have, including all your tax information. From this, the government calculates what you should be able to pay for tuition. A good rule of thumb with FAFSA is that the government always thinks you can pay about three times as much as you do. The school generally thinks that you can do better than FAFSA thinks you can. The school's faith in your ability to pay is reflected in the amount of tuition demanded.

I may not know how that bottom line number was calculated, but I knew what it was. But neither this number, nor any combination of any numbers on the school's tuition bill added up to the $12,000 amount disclosed in Box 2 of Younger Daughter's 1098-T. I tried them all. I also tried dividing by my zip code and multiplying by my shoe size -- but I could not arrive at the number in that little box.

In despair, I gave up. I answered the Turbo Tax question 'yes.' But I have no idea whether I was right or wrong. And then it hit me: I had squandered the morning, and I'd acted in the utmost good faith -- but I still don't know that my taxes were correctly done on this point. I am comforted by the fact that all these machinations were devoted to the very narrow question of whether or not I could claim a $2,000 credit for college tuition paid in 2008. Since I paid lots more than $2,000 I'm pretty sure that the return is technically correct. But I am also certain that this debacle was my karmic punishment for cracking wise about other peoples' tax problems.