NAICU Washington Update

Clarification and Additional Information on 1098-T IRS Penalty Notices

October 07, 2013

On September 20, NAICU provided a summary and preliminary guidance for colleges and universities who have received penalty notices from the IRS for failing to provide adequate student tax identifiers like Taxpayer Identification Numbers (TINs) or Social Security Numbers (SSNs).

We want to clarify that the regulations implementing the higher education tax credits do contain language requiring this information to be furnished by the student or family to the institution via IRS Form W-9S. In our alert, we inadvertently said that students cannot be required to provide the information.

Form W-9S states the requirement that a TIN or SSN be provided to the college or university. It includes instructions for obtaining a TIN if a student doesn’t have a SSN, and instructions for completing the form if the TIN or SSN have not been received yet. The W-9S indicates that the IRS may impose a $50 penalty on students who do not comply. It’s important to note that this student penalty would be in addition to any penalties the IRS recently asserted in the penalty notice colleges received. It is unclear whether the IRS has ever enforced the student penalty provision, or intends to do so now.

While colleges must do due diligence in soliciting this information from students and must describe those efforts sufficiently to the IRS, it is often difficult to obtain that information from students. Students and their families are often reluctant to share personal information.

Institutions should continue to gather the necessary information to respond promptly to the IRS if they have received a penalty notice. As part of the process of showing due diligence when attempting to collect the necessary information, it’s advisable to make certain that the Form W-9S is provided to students.

We hope this clarification is useful in your continued efforts to follow the complex maze of federal regulations.

The National Association of College and University Business Officers (NACUBO) has provided additional guidance on responding to the IRS if your institution has received a penalty notice.

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