ISSUE

The 2015 PATH Act mandated changes to Form 1098-T reporting.  Those “Box 1 only” changes take effect in 2018.

 

SITUATION

Idaho Bible College and Seminary (IBCS) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(i).  They are not required to file Form 990 annually.

The new Controller at IBCS just started last week.  She called us to ask about issues with Form 1098-T including which institutions must file and what are the “changes” she’s been hearing about.

Our answers are:

All “eligible educational institutions” must file Form 1098-T for all of their students – with some exceptions.  Generally, an “eligible education institution” is a college, university, vocational school, or other postsecondary educational institution that is eligible to participate in the Department of Education’s student aid programs.

A few years ago, many colleges, seminaries, universities received penalty notices from the IRS based upon their filing of some Form 1098-T’s that omitted students’ Taxpayer Identification Numbers (TIN).  The IRS issued guidance about requesting TIN’s in a certain manner that was likely to be seen by all students and, thus, have backed off on these penalties for institutions that follow the prescribed guidelines.

In addition, for 2018 (forms filed in early 2019), only Box 1, “Payments Received for Qualified Tuition and Related Expenses” can be used to report student payment amounts.  Historically, colleges have had a choice between Box 1 “amounts paid” and Box 2 “amounts billed.”

 

RULES

From Form 1098-T Specific Instructions:

Who must file.  You must file Form 1098-T if you are an eligible educational institution. An eligible educational institution that is a governmental unit, or an agency or instrumentality of a governmental unit, is subject to the reporting requirements of Form 1098-T. A designated officer or employee of the governmental entity must satisfy the reporting requirements of Form 1098-T.

Eligible educational institution.  An eligible educational institution is a college, university, vocational school, or other postsecondary educational institution that is described in  section 481 of the Higher Education Act of 1965 as in effect on August 5, 1997, and that is eligible to participate in the Department of Education’s student aid programs. This includes most accredited public, nonprofit, and private postsecondary institutions.

Exceptions.

You do not have to file Form 1098-T or furnish a statement for:

  • Courses for which no academic credit is offered, even if the student is otherwise enrolled in a degree program;
  • Nonresident alien students, unless requested by the student;
  • Students whose qualified tuition and related expenses are entirely waived or paid entirely with scholarships; and
  • Students for whom you do not maintain a separate financial account and whose qualified tuition and related expenses are covered by a formal billing arrangement between an institution and the student’s employer or a governmental entity, such as the Department of Veterans Affairs or the Department of Defense.

From NACUBO’s “Advisory Report 2014-1”:

To avoid being subject to fines for failure to report correct TINs on Form 1098-T, institutions must solicit any missing TINs:

  • at least once a year
  • in writing
  • with a clear notice that the individual is required by law to provide the TIN so that it may be included on an information return

From NACUBO’s “Update on Form 1098-T:Q&A” (December 21, 2017):

Institutions may continue to report amounts billed in Box 2 for tax year 2017 (forms filed in 2018). For tax year 2018 (forms filed in 2019), all institutions must report amounts paid in Box 1; because Box 2 will no longer be used it is grayed out on the 2018 form. Shortly after the NACUBO webcast IRS posted the official 2018 Form 1098-T.

 

BOTTOM LINE

  • If your institution is an “eligible educational institution,” you should be filing Forms 1098-T annually.
  • The 2015 PATH Act enacted changes to Form 1098-T filing – including “Box 1 only” reporting.
  • The IRS set forth a “safe harbor” plan for filing Form 1098-T’s that do not include Taxpayer Identification Numbers.
  • Make sure that your 2018 Form 1098-T’s (filed in early 2019) conform to the changes in reporting rules.

 

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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