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Business and Policy Areas
Business and Policy Areas

IRS Response to NACUBO on 1098-T Penalties Offers No Relief

November 13, 2014

No further blanket waivers will be offered related to penalty notices sent to colleges and universities applicable to 1098-T reporting for tax year 2012, an October 28 letter from the Internal Revenue Service to NACUBO clarifies.

The letter—signed by Shelley Foster, acting director of examination policy for the small business/self-employed division of the IRS—was in response to NACUBO's September 19 correspondence seeking relief from penalties that have been assessed against hundreds of colleges and universities for missing or inaccurate taxpayer identification numbers (TINs) reported on Forms 1098-T.

Status Quo Confirmed. The IRS rejected NACUBO's suggestion that the annual cycle of penalty notices and waiver submissions be streamlined by permitting colleges to certify up front in the filing process that they have acted in a reasonable manner for TIN collection because it is, "inconsistent with current rules for establishing reasonable cause under section 6724."

In short, the letter confirms the IRS' intention to annually send out penalty notices for missing or inaccurate TINs, encouraging "affected colleges and universities to seek reasonable cause relief when applicable."

Continuing Challenges. Absent from the IRS' response was any recognition or discussion of current issues with management of the penalty program being administered in the small business and self-employed division. Colleges and universities that responded to 972CG notices for 2011 in a timely fashion with the requisite information have been hit with fines many months later (as if they have not responded), and in at least one case an IRS lien was placed against an institution. Others that submitted timely responses for 2011 are just now receiving their official notice of waiver—some still have yet to receive it. NACUBO has had reports that IRS staff contacted by institutions in response to the penalty notices have in some cases been unaware of and demanded proof of the 2011 waiver.

NACUBO is appealing to senior leadership at the IRS on this issue to identify solutions and process improvements that make sense for colleges and universities as well as the IRS.


Mary Bachinger
Director, Tax Policy