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ISSUE

Through the Summer and Fall of 2020, the apparent IRS guidance was that student grants under the CARES Act Section 18004, Higher Education Emergency Relief Funds (HEERF), would be required to be reported on your 2020 Form 1098-T’s sent to students in January 2021.  The grants, it seemed, would only be reported in Form 1098-T, Box 5.  The IRS (on December 14, 2020) issued guidance that these payments would NOT be required to be included on the 2020 Form 1098-T – Hallelujah!

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.

SCC’s Controller called to ask if we’d heard any updates with regard to the required inclusion of HEERF Student Grants on Form 1098-T…

“We’ve seen several reports from national membership and advocacy groups that indicated that we will need to include HEERF grant payments to students on our Form 1098-Ts.  Is that true?  If so, it could be an incredible administrative burden on our school because of the way our software reports student aid.”

We said.  “Well, last week we would have answered ‘Yes’ to your question, but now – Thanks to the IRS! – we have guidance (in the form of an IRS FAQ, updated December 14, 2020) that states the “IRS will not require that these grants be reported pursuant to section 6050S of the Internal Revenue Code on Form 1098-T.”

“That’s great,” she said.  “Merry Christmas!”

“Merry Christmas to all!”

 

RULES                                                                       .

From IRS FAQs: Higher Education Emergency Relief Fund and Emergency Financial Aid Grants under the CARES Act:

Q3: Do higher education institutions have any information reporting requirements under section 6050S for emergency financial aid grants awarded to students under section 3504, 18004, or 18008 of the CARES Act? (added December 14, 2020) 

A3: No. The emergency financial aid grants are qualified disaster relief payments, as described in A1 above, and are not included in students’ gross income. As noted in A2 above, students may not claim deductions or credits for these amounts. The reporting of these grants to the IRS on Forms 1098-T could result in the issuance of underreporter notices (Letters CP2000) to students and furnishing such Forms 1098-T to students could cause confusion. Thus, the IRS will not require that these grants be reported pursuant to section 6050S of the Internal Revenue Code on Form 1098-T.  (Underline added.)

Take a look at:

FAQs: Higher Education Emergency Relief Fund and Emergency Financial Aid Grants under the CARES Act | Internal Revenue Service (irs.gov)

 

BOTTOM LINE

  • CARES Act Section 18004 provided emergency relief to many institutions in 2020 under the Higher Education Emergency Relief Fund (HEERF).
  • There are basically four “buckets” or types of funds in the HEERF allocations.
  • Section 18004(a)(1) required that at least 50% of the funds from that subsection be used for emergency financial aid grants to students.  (Although, student grants could be made from any of the HEERF allocations received by an institution.
  • The IRS released an updated FAQ this week indicating that HEERF Student Grants are not required to be included on Form 1098-T.  This is welcome news.

 

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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