IRS Corrects Auditors’ Misinterpretation of 1098-T Requirements
November 21, 2011
The September 16 report of the Treasury Inspector General for Tax Administration’s report entitled Billions of Dollars in Education Credits Appear to Be Erroneous, included a recommendation for the Internal Revenue Service to conduct audits of tax credits allegedly wrongfully claimed. IRS accordingly initiated audits of taxpayers--students and their families--to take a closer look at the education tax credits claimed.
Over the past few weeks, members alerted NACUBO that students under audit were receiving an IRS-generated letter directing them to obtain another Form 1098-T from the institution they attended, with Box 1 completed (payments received for qualified tuition and related expenses), rather than Box 2 (amounts billed for qualified tuition and related expenses). Some students also reported conversations in which IRS staff asserted that the institution had completed the 1098-T incorrectly by failing to report amounts paid and needed to redo it.
According to the final rules governing reporting requirements in §6050S(b)(2)(B)(i) of the Internal Revenue Code, institutions clearly have the option to either report payments received or amounts billed.
In an effort to prevent the further spread of confusion on this topic and to enhance the training of and communications made by IRS field examiners, NACUBO brought the misinterpretation of the rules to the attention of the national IRS office. We reported that universities in Minnesota, North Dakota, Utah, and California had fielded similar erroneous requests for amended 1098-Ts from students and families, at the direction of IRS examiners.
Within a few days, NACUBO received a response from the IRS apologizing about confusion resulting from the inaccurate IRS requests for information and was told that a clarification has been provided to IRS offices operating the automated underreporter program instructing them to stop asking for Forms 1098-T with Box 1 filled in, and an assurance that the problem has been corrected going forward.
Director, Tax Policy
- NACUBO Expresses Concerns with ED Proposal to Expand Federal Financial Responsibility Rules
- IRS Proposes Modifications to 1098-T Reporting
- ED Policy to Require Annual Student Aid Compliance Audits Beginning FY17
- 2016 Intermediate Accounting and Reporting Fall
October 24-25, 2016
- ON-DEMAND: The CBO's Role in Diversity and Inclusion on Campus
- ON-DEMAND: The Clery Act: Strategic Planning to Mitigate Institutional Risk
- ON-DEMAND: Title IX: Key Issues Surrounding Institutional Compliance
- ON-DEMAND: NACUBO Live! Higher Education Accounting Forum
- ON-DEMAND: Responsibility Center Management: Two Different Perspectives