In a departure from treatment of emergency grants made available in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), student grants made from the second round of federal aid contained in the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) may need to be reported on the Form 1098-T, according to a notice published by the IRS on January 19.
In 2020, the IRS characterized CARES Act emergency grants to students as disaster relief grants and subsequently published guidance clarifying that the aid was not taxable income for students and did not need to be reported on the Form 1098-T. While the second round of aid is still not taxable income to the student, there may be a reporting obligation for institutions which elect to allow students to apply the emergency grant directly to pay for qualified tuition and expenses.
In the CRRSAA, there was an expansion of the grant provision permitting institutions to apply the emergency grants to a student’s account—only after receiving written (or electronic) affirmative consent from the student—that could potentially be payments for qualified tuition and related expenses (QTRE). This prompted IRS to reinterpret the requisite reporting requirements for institutions.
With regard to student emergency grants, the notice states that there is no requirement to report those amounts on the Form 1099-MISC; however, it states that “the waiver does not apply to the requirement to file and furnish Form 1098-T, Tuition Statement, with respect to any payments received for qualified tuition and related expenses, including qualified tuition and related expenses paid with grants described in this notice.”
The notice does not include any further detail on this topic. The notice also addresses information reporting waivers and requirements related to several other COVID-19-relief provisions.
NACUBO is Seeking Additional Guidance
NACUBO is in communication with Treasury officials and has reminded policymakers that IRS guidance prior to publication of the Notice on January 19 was the IRS FAQ stating that CARES Act grants to students need not be reported on the 1098-T and systems were adjusted to distribute those grants accordingly. We have asked for additional guidance clarifying that the requirement for 1098-T reporting will apply only to amounts of QTRE paid directly with CRRSAA student emergency grants administered on or after January 1, 2021. Until the IRS publishes clearer guidance, campus administrators should track amounts of student emergency grants distributed this year.