IRS Waives Penalties for 1098-Ts with Missing or Incorrect TINs
February 6, 2014
Late last week, the Internal Revenue Service announced it will waive penalties on colleges and universities for filing Form 1098-T, Tuition Statement, with missing or incorrect taxpayer identification numbers (TINs) for 2011. In some cases, IRS had proposed fines exceeding $1 million. NACUBO continues to work with member institutions and outside counsel to resolve this matter for future years.
For the first time, beginning in August 2013, many colleges and universities received IRS Notice 972CG proposing to impose a $100 fine for each information return filed for tax year 2011, including 1098-Ts, with missing or incorrect TINs. IRS regulations require institutions to file Forms 1098-Ts even with missing TINs. The rules allow a waiver of penalties for missing or inaccurate TINs if the institution annually solicits student TINs in writing, in the specified manner. NACUBO Advisory Report 2013-1 (October 2, 2013) [embed the link] provides detailed background information, an explanation of the rules, and recommendations for responding to penalty notices, including sample letters to send to IRS.
Institutions may have incorrect or mismatched TINs for students because there is no mechanism colleges can use to verify the accuracy of numbers provided by students. IRS has an online TIN matching program for use related to other information returns (for example, Forms 1099). Current law, however, clearly prohibits the use of that program for 1098-T purposes.
Absent a change in the law to permit access to the matching program or some other process implementation by IRS, the "receive-a-penalty/ask-for-a-waiver" cycle is likely to recur each year when institutions file 1098-Ts with missing or incorrect TINs. Without additional action, for instance, we expect a repeat of this cycle for the 2012 tax year because all reporting was completed before schools knew of the new enforcement efforts.
NACUBO has been pursuing several avenues with IRS for achieving relief from penalties until institutions are able to access existing TIN matching programs or IRS devises an improved communications process to address the issue.
Two members of the NACUBO Tax Council serve on the IRS Information Reporting Program Advisory Committee (IRPAC), and they continue to raise this issue and other areas for improvement of IRS processes related to Forms 1098-T. Anne Jetmundsen, tax manager at the University of South Florida, and Julia Shanahan, tax director at the University of Washington, placed the penalty issue on IRPAC's agenda last November. Their efforts undoubtedly helped bring about the recent announcement of waivers for the 2011 tax year.
On another track, NACUBO continues to work with outside counsel to address this issue going forward. As part of this effort, two universities have volunteered to serve as model "plaintiffs" on behalf of the higher education community and have asked the National Taxpayer Advocate (an IRS office) to support relief, including an end to further penalty notices for tax year 2012 and beyond-unless, and until, schools are able to use the TIN matching program.
Here is the full text of IRS announcement:
IRS to Waive Forms 5498, 1098-T and 1099-G Penalties for the Initial Year of Introduction
In tax year 2011, the IRS introduced Forms 5498, 1098-T and 1099-G into the penalty notice program and included these returns on the Notice 972CG. Though inaccurate information returns may be assessed a penalty under Internal Revenue Code section 6721 (Failure to File Correct Information Returns), the IRS will waive penalties associated with these three forms for the 2011 introductory tax year.
Taxpayers who receive Notice 972CG, with any of the forms listed, are urged to respond to the IRS Campus as directed in the notice to obtain a waiver of the penalties. The IRS is working the requests for waiver in the order that they are received. It may be several weeks before taxpayers receive notification that their penalties are waived.
Again, at this time, the waiver applies to the 2011 tax period only.
Taxpayers and/or representatives who have questions should contact the IRS per the instructions in their notice.
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