NAICU Washington Update

Colleges Receiving IRS Penalty Notices in Random Compliance Check

September 19, 2013

The IRS has recently issued a slew of penalty notices to a random sampling of public and private colleges and universities who are failing to provide student specific information along with Forms 1098-T. The penalty notices propose stiff fines for not properly reporting student Taxpayer Identification Numbers(TINs) or Social Security Numbers (SSNs) with the 1098-Ts.

Form 1098-T is the Tuition Payments Statement that colleges and universities are required to issue for the purpose of determining a student’s eligibility for the American Opportunity and Lifetime Learning tax credits. Institutions submit the 1098-Ts annually to the IRS and typically provide the student with a copy.

The IRS requires that institutions regularly solicit TINs and SSNs from students and provide them with the 1098-Ts for the most accurate student information. While colleges and universities do request this information from students, students are not required to provide this information to the college.

The National Association of College and University Business Officers (NACUBO) has determined through conversations with IRS representatives that there are steps colleges can take to demonstrate that they have made a good-faith effort to collect the required information and possibly avoid the fines.

Institutions must respond within 45 days of receiving the notice, or ask for an extension. Colleges must show that a reasonable effort is made to collect current data, and that the institution is, and will continue to, act in a responsible manner. Providing the IRS with the steps taken to solicit this information is helpful, and responses should be provided in brief letter form, rather than complex student spreadsheets or databases. Finally, colleges should communicate with the IRS on their practices and procedures, but should not re-file corrected tax returns.

NACUBO is preparing additional guidance for their business officers, and we’ll share that information when it’s available.

The IRS has increased scrutiny of certain sectors and filers due to reports of taxpayer fraud involving individuals who are ineligible for certain tax benefits claiming them anyway. The penalty notices being sent to colleges failing to report TINs or SSNs reflects their interest in ensuring that only students eligible for the tax benefits are claiming and receiving them.

A helpful IRS publication can be found by clicking here.

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