The Catholic University of America

Summary of Federal Laws

Tax

Tax Issues Related to Students

Tuition Payment Credit Reporting Requirements

 26 USC § 25A (f); 26 U.S.C. § 6050S; 26 CFR 1.6050S-1 et seq.; 26 CFR 301.6724-1

In general, section 6050S requires eligible educational institutions who receive payments of qualified tuition and related expenses to file information returns and to furnish written information statements to assist taxpayers and the IRS in determining any education tax credit allowable under the Hope Scholarship or Lifetime Learning Credit as well as other tax benefits for higher education expenses.

The reporting to both students and the IRS is accomplished by using Form 1098-T "Tuition Payments Statement". This form is filed with the IRS for each individual with respect to whom payments of qualified tuition and related expenses were received, or reimbursements or refunds of such expenses were made. The university does not have to file a 1098-T on a student when a refund is issued in an amount equal to or greater than the amount the student paid. The information reporting requirements of this section do not apply with respect to any individual who is a nonresident alien during the calendar year, unless the individual requests the institution or insurer to report. The institution is also not required to file a report for an individual who receives no academic credit; for students whose tuition and related expenses are covered by a formal billing arrangement between the institution and the student's employer; or for students whose tuition and related expenses are entirely waived or paid entirely with scholarships.

Thus, payments for employees made under I.R.C. § 127 (tuition assistance programs) do not have to be reported. The standards in the Higher Education Act should be used to determine full-time, half-time, or less than half-time status.

Copies of Form 1098-T must be sent to all covered students by Jan. 31st of the year following that payments were received or refunds were given.

From 26 US Code 25A(f)
(A) In general The term “qualified tuition and related expenses” means tuition and fees required for the enrollment or attendance of—
(i) the taxpayer,
(ii) the taxpayer’s spouse, or
(iii) any dependent of the taxpayer with respect to whom the taxpayer is allowed a deduction under section 151, 
at an eligible educational institution for courses of instruction of such individual at such institution.

(B) Exception for education involving sports, etc.
Such term does not include expenses with respect to any course or other education involving sports, games, or hobbies, unless such course or other education is part of the individual’s degree program.

(C) Exception for nonacademic fees
Such term does not include student activity fees, athletic fees, insurance expenses, or other expenses unrelated to an individual’s academic course of instruction.
(2) Eligible educational institutionThe term “eligible educational institution” means an institution—
(A) which is described in section 481 of the Higher Education Act of 1965 (20 U.S.C. 1088), as in effect on the date of the enactment of this section, and
(B) which is eligible to participate in a program under title IV of such Act.

1098-T reporting requirements:


Provide Information Return (Form 1098-T) to all students (except those excluded) with the following:

· the name, address, and taxpayer identification number of the institution;

· the name, address and taxpayer identification number of the individual with respect to whom payments of qualified tuition and related expenses were received, or to whom refunds or reimbursements were made;

· an indication by the institution whether the individual was enrolled for at least half of the normal full-time workload for the course of study pursued;

· an indication by the institution whether the individual was enrolled in a program leading to a graduate-level degree, graduate- level certificate, or other recognized graduate-level educational credential; and

· any other information required by the Form 1098-T.

See the instructions relating to this form, and a copy of the Form 1098-T.

The mailing to the student must also include a legend that identifies the statement as important tax information being furnished to the IRS, as well as the following:

· A statement that the taxpayer may not be able to claim an education tax credit under Section 25A with respect to the total payments reported.

· A statement that the amount of any scholarships, grants, refunds or reimbursements reported for the calendar year and other similar amounts not reported (as not processed by the institution) may reduce the amount of any allowable education tax credit.

· A statement that the taxpayer should refer to Publication 970 (Tax Benefits for Higher Education) and other relevant forms and publications.

· The name, address, and phone number of the information contact for the institution filing the form.

The statement should be mailed to the individual's permanent address, or the individual's temporary address if the institution or insurer does not know the individual's permanent address. See 26 CFR 1.6050S-2T for the rules on how to provide Form 1098-T electronically to students. The conditions for using electronic distributions of Form 1098-T to students are fairly extensive, and incorporate consent provisions. See also Part H of Instructions for Forms 1099, 1098, 5498 and W-2G.

Schools must provide to  the IRS  Form 1098-T for each student enrolled and for whom a reportable transaction is made. The same information that is required to be reported to students must be sent to the IRS.


An institution must request the taxpayer identification number (TIN)1 of each individual with respect to whom payments of qualified tuition were received, or reimbursements or refunds were made, if it does not already have a record of the individual's correct TIN. If the institution does not have a record of the individual's correct TIN, then it must solicit the TIN on or before December 31.  Since the Form 1098-T does ask for the student's social security number, this information should be collected. When the person does not know the number, pursuant to 26 C.F.R. § 301.6109-1, the person filing with the IRS must request the other person's number, stating that it is required to be furnished under authority of law. Once this request provision has been followed, and if a number still has not been provided, the person making the request must sign an affidavit on the transmittal document forwarding such returns, statements or other documents to the IRS.

An institution must notify the individual that the individual's failure to furnish his/her TIN to the institution may result in a $50 penalty being imposed against the individual as authorized by law. A request for a TIN made on Form W-9S, "Request for Student's or Borrower's Social Security Number and Certification," satisfies the requirements. An institution that follows the regulations for soliciting a TIN will be considered to have acted in a responsible manner and will not be subject to penalties under I.R.C. § 6721.

 

The IRS provides a detailed (30 page) publication with instructions and suggestions on how to respond and request a penalty waiver; it has a section on page 5 titled "How to Answer Notice 972CG" - it is IRS Pub. 1586, Reasonable Cause Regulations and Requirements for Missing and Incorrect Name/TINs. 

Resources

When there are missing or incorrect TINs, see IRS Publication 1586: Reasonable Cause Regulations for Missing and Incorrect Names/TINS.

ASU page w/explanation of Form 1098-T

  

 Q-8. What amounts must an institution report in Box 5 as scholarships or grants?

A-8. Section 6050S(b)(2)(B)(ii) of the Code provides that an institution must report the amount of any grants that the institution administered and processed during the calendar year for the payment of the student’s costs of attendance. A student’s costs of attendance may include both qualified expenses (such as tuition and required fees) and non-qualified expenses (such as room and board). The institution should report these amounts in Box 5. A qualified tuition reduction described in section 117(d) of the Code is not a scholarship or grant, and accordingly, should not be reported in Box 5; but such a reduction is relevant in determining the net amount reported in Box 2 if the institution elects to report amounts billed.

Whether an institution reported scholarship or grant amounts in Box 5 is not considered in determining amounts to be reported as payments received (Box 1) or as amounts billed (Box 2) for qualified expenses. An institution that elects to report payments received for qualified expenses generally must include the amount of scholarships and grants in Box 1, except any scholarship or grant that by its terms must be applied to expenses other than qualified expenses, such as room and board (see section 1.6050S-1(b)(2)(v) of the regulations). An institution that elects to report amounts billed for qualified expenses may not reduce the amount reported in Box 2 by scholarships or grants.

 

 

 

 

 

 

 

 

 

updated 8-24-18 mlo