Tax Tips Logo ImageISSUE

Schools that are “eligible educational institutions” must file Form 1098-T by fast approaching due dates.  In addition, with the “deletion” of Box 2 (Amounts billed) beginning with the 2018 form, there remains much confusion with regard to this form.

SITUATION

Saltwater Christian College (SCC) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

The SCC Accounting Team calls us with three issues:

  1. What are the various due dates (there are three) for the form?
  2. If we receive payment in December 2019 for classes beginning in January 2020, what year do we include those payments in Form 1098-T, Box 1.
  3. What if we issue a refund in the following calendar year for the amount received in #2?

The short answer to #1 is:

  • Copy B to students by 2/1/20
  • Copy A to IRS by 2/28/20 (if paper filed)
  • Copy A to IRS by 3/31/20 (if eFiled)

**Beware of penalties for late filing!

Question #2 is more interesting.  Generally, according the instructions for Box 1, the payment received in December 2019 would be reported to the student on the 2019 Form 1098-T, Box 1.  Box 1 should include “payments received for qualified tuition and related expenses from all sources during the calendar year.”

Question #3: If a refund associated with the amount in #2 was given to the student in January 2020 (a subsequent calendar year), that’s what the 2020 Form 1098-T, Box 4 is for.

Carefully review the instructions for Form 1098-T, Boxes 1, 4, and 5.  And, if you take a position, document, document, document.  (Establish a written procedure and consistently apply it.)

 

RULES

From 2019 Form 1098-T, “Instructions for Filer”:

Due dates. Furnish Copy B of this form to the student by January 31, 2020. For information on furnishing Form 1098-T electronically, see the separate Specific Instructions for Form 1098-T.

File Copy A of this form with the IRS by February 28, 2020. If you file electronically, the due date is March 31, 2020. To file electronically, you must have software that generates a file according to the specifications in Pub. 1220. The IRS does not provide a fill-in form option for Copy A.

From “Instructions for Forms 1098-E and 1098-T”:

[Form 1098-T] Box 1. Payments Received for Qualified Tuition and Related Expenses

Enter the total amount of payments received for qualified tuition and related expenses from all sources during the calendar year. The amount reported is the total amount of payments received less any reimbursements or refunds made during the calendar year that relate to the payments received for qualified tuition and related expenses during the same calendar year. The amount reported is not reduced by scholarships and grants reported in box 5. Include in this box the receipt of a payment of past-due qualified tuition or related expenses from a previous calendar year, but only if the educational institution previously billed the student for such amount(s). [Underline added]

 

BOTTOM LINE

  • Form 1098-T still contains opportunities for penalties from several angles (late filing, no student ITIN, etc.)
  • The due dates are approaching, ensure that your team is aware of those dates.
  • Carefully review the specific instructions annually for Form 1098-T. (The IRS instructions are “shared” with those for Form 1098-E.)
  • Take a look at NACUBO’s Advisory 18-06, Guide to Form 1098-T Information Reporting for more information.

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

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