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What exactly is a scholarship?

Will IRS know exactly what I spend my scholarship money on?

  • I was awarded $1500 in scholarships last year. Most it went to pay tuition, and the rest of it was given back to me in the form of a refund check which I cashed into my checking account, and from there it went to pay for books, but how can I prove on my tax return that the rest went to books, indeed. I've lost my receipts for the purchases of the textbooks, so if I get audited, I'll have no proof...what should I do? I'm concerned because I don't want to get taxed on my scholarship when it is in fact tax free since the money went to towards tuition and textbooks. But how will IRS know that for sure?

  • Answer:

    Most students will never be asked to produce any receipts. Especially for the small amounts of scholarship income that you are talking about. Are you sure you do not have any proof? Most students I have dealt with have been able to go online and get receipts or go to their credit card company or school bookstore to get a new receipt. A list of the required books from your classes is also helpful. Also, do you have enough income otherwise that you even have any tax liability? If not, then you also would not need to worry about it.

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They can ask you to prove what you used it on If the sum is too large, they can and will ask If it went into your checking account, then you should be able to track it, print out your checks, or debit amounts at college bookstore Reconstruct your records. . . .that is permissible. . . .do it now, while you can. . . .otherwise it can be disallowed, and you have to pay tax plus penalties & interest on it

you might need to prove to IRS with receipts when your school does not issue you a 1098 E on the books you purchased thru the school

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