NACUBO Presses IRS for Relief From 1098-T Penalties

November 2014

By Mary Bachinger and Liz Clark

In a September 19 letter to the Internal Revenue Service, NACUBO President and CEO John Walda urged the IRS to stop issuing to colleges and universities penalty notices related to missing or inaccurate taxpayer identification numbers (TINs) on Form 1098-T and waive penalties assessed for 2012.

In February, the IRS had issued a blanket waiver for all such penalties assessed for tax year 2011. Then in August, it began sending out hundreds of similar penalty notices to colleges and universities, applicable to forms filed for tax year 2012.

Walda stated in the letter, "Given that Forms 1098-T for 2012 were all filed long before the proposed fine notices were issued for the 2011 tax year, and nothing has changed that should cause the IRS to come to a different outcome for 2012, it is unclear why the IRS is repeating the cycle this year."

Requested IRS Revisions

In the letter, Walda urged the IRS to take several actions to improve the processes related to Form 1098-T, including:

Cease sending 972CG notices related to the 2012 Form 1098-T.
Publish guidance reinstating forbearance on these penalties until a long-term solution has been identified.
Revise the 1098-T filing process to allow filing institutions to affirmatively certify up front that they have "acted in a responsible manner" and met the waiver standards for soliciting TINs from students.
Revise the §6050S regulations to allow institutions to refrain from filing the 1098-T for students who fail to provide a TIN. (For more details on collecting TINs, see sidebar, "Keeping Track of Student TINs.")

Take Action Now

Until or unless the IRS makes an announcement waiving 2012 penalties, colleges and universities that have received penalty notices should either request an extension of the 45-day period provided for response or proceed with filing a request for a waiver.

In many cases, institutions will find that last year’s waiver request can simply be updated and resubmitted. NACUBO Advisory Report 2013-1, prepared last year in response to the 2011 notices, provides background information and guidance on responding to the IRS.

NACUBO CONTACT Mary Bachinger, director, tax policy, 202.861.2581

Keeping Track of Student TINs

Colleges and universities must collect students’ taxpayer identification numbers (TINs) in order to meet their institution’s obligations to report tuition payments on Internal Revenue Service Form 1098-T. To avoid fines for missing or incorrect numbers, IRS regulations require institutions to solicit correct numbers at least once a year. After the IRS sent notices of proposed fines to hundreds of campuses in 2013, and again this year, institutions have focused more on the best ways to ensure compliance.

NACUBO provides guidance. NACUBO Advisory Report 2014-1, Collecting Taxpayer Identification Numbers for Form 1098-T Reporting, provides advice on best practices, relevant regulations, and model substitute W-9S forms. A joint subcommittee of NACUBO’s Student Financial Services and Tax councils developed the advice, with assistance from representatives from the American Association of Collegiate Registrars and Admissions Officers.

IRS develops substitute forms. The IRS created Form W-9S, Request for Student’s or Borrower’s Taxpayer Identification Number and Certification, for institutions and lenders to use to collect the TINs needed for filing 1098-E and 1098-T. For several reasons enumerated in Advisory Report 2014-1, Form W-9S does not always meet the needs of institutions. NACUBO has prepared two sample substitute forms, available on the NACUBO website, that members are welcome to use or modify further. The online version of the report provides sample forms in Microsoft Word to allow filers to add the school name and other information.