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NACUBO has sent a second letter to the Internal Revenue Service (IRS) in an attempt to resolve problems with its administration of the Form 1098-T penalty program. While provisions in the recently enacted Trade Preferences Act of 2015 (TPA) will enable institutions to avoid receiving automatic penalties for missing TINs by certifying at the time of filing that they have met the appropriate solicitation standards. The measure goes into effect for statements furnished after December 21, 2015.

In the meantime, the IRS is still pursuing penalties for the 2012 tax year and, without action by IRS senior leadership, NACUBO expects penalty notices for the 2013 tax year will begin arriving on campuses later this summer.

NACUBO's July 9 letter cites numerous concerns that have emerged related to the penalties and asks the IRS to take immediate steps to address current and future issues with the enforcement program:

  • Blanket waiver of 2012 penalties. All Forms 1098-T for 2012 were filed long before the IRS sent campuses proposed fines for 2011. Fines for 2011 were waived. Since there were no material differences between tax years 2011 and 2012, there is no apparent basis for imposing penalties on colleges for 2012, either.
  • Follow the rules. NACUBO spotlights the confusion created by system-generated communications from the IRS to institutions that responded to penalty notices in a timely manner; inappropriate and premature seizure of institutional assets by the IRS; and widespread misapplication of its own regulations by IRS staff responding to waiver requests. NACUBO staff have raised these issues with the IRS for many months with no acknowledgment of the errors or corrections to the penalty relief procedures.
  • Suspension of penalties until there is guidance. Since the new process enacted by the TPA will not go into effect until forms are filed for this year, NACUBO urged the IRS to suspend penalties until guidance implementing the new requirement is available.

Alternatively, NACUBO suggested that instead of mailing out hundreds of 2013 penalty notices, the IRS send out a simple form letter to schools, asking them to respond by certifying that they have met the regulatory standards for TIN collection for 1098-T reporting. If the institution responds with its certification in a timely manner, it should not receive a penalty notice for 2013. The same process would be applied for the 2014 reporting year, thus bridging the gap to implementation of the new procedures that will be in effect for 2015.

NACUBO continues to closely track this issue and discuss relief options with policymakers. We will report any new information as it becomes available.

Resources:
Lawmakers Ease 1098-T Penalty Enforcement
NACUBO Presses IRS for Relief from 1098-T Penalties
Advisory Report 2014-1, Collecting Taxypayer Identification Numbers for Form 1098-T Reporting

 

Contact

Mary Bachinger

Director, Tax Policy

202.861.2581


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