Penalty relief for colleges and universities filing Forms 1098-T

Penalty relief for universities filing Forms 1098-T

June 30: The president yesterday signed into law H.R. 1295, the Trade Preferences Extension Act of 2015—legislation that includes a provision that eliminates penalties for failure to provide the taxpayer identification number (TIN) of an individual on Forms 1098-T filed by colleges and universities.

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Read the text of the law (section 805 of the Act).

Background

In general, section 6050S(a)(1) requires colleges and universities to report payments received (or amounts billed) for qualified tuition and related expenses on Form 1098-T, Tuition Statement.

Sections 6721 and 6722 impose penalties for failures to file timely correct information returns with the IRS or to furnish timely correct statements to students. 

Beginning with calendar year 2011, the IRS included Form 1098-T in its automated penalty notice program (Notice 972CG), resulting in a proposed $100 penalty for each missing or incorrect TIN.

Many of the penalties on Notice 972CG relate to incorrect TINs from students supplying an incorrect number on their enrollment forms or not supplying a TIN. The IRS offered a waiver for calendar year 2011 Form 1098-T reporting failures related to TINs. However, colleges and universities continued to receive notices for calendar years 2012 and 2013. Absent a legislative solution, it was expected that these notices and proposed penalties would continue.

Legislative solution

Pursuant to section 805 of the Trade Preferences Extension Act of 2015, no penalties will be imposed under sections 6721 or 6722 on a college or university that fails to provide the TIN of an individual on a Form 1098-T, provided that the college or university contemporaneously makes a true and accurate certification under penalties of perjury that it has complied with standards promulgated by the IRS for obtaining the TIN.

The provision applies to Forms 1098-T required to filed or furnished after December 31, 2015 (i.e., calendar year 2015 Forms 1098-T).

KPMG observation

Although the removal of penalties for missing TINs on Forms 1098-T will be viewed as a welcome reprieve by many colleges and universities, a number of issues remain unclear. The IRS will need to provide a mechanism to enable colleges and universities to satisfy the penalties of perjury certification. In addition, it is unclear whether the elimination of penalties applies solely to Forms 1098-T with missing TINs or whether it also extends to Forms 1098-T with incorrect TINs.

For more information, contact a KPMG tax professional:

D. Greg Goller, Managing Director-in-Charge of KPMG's Washington National Tax Exempt Organizations Tax group, at (703) 286-8391

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