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IRS Expands FAQs to Address Higher Education Emergency Grants Used to Discharge Student Balances

2/24/2022

The IRS has updated the frequently asked questions for higher education emergency grants to clarify for taxpayers and tax professionals that—

  • Federal relief funds used by the institution to cancel or discharge a balance on a student’s account will not be included in the student’s gross income, because the debt is being paid by the federal government in response to the COVID-19 pandemic
  • Institutions are not required to file or furnish Forms 1099-MISC, reporting amounts used to pay students’ overdue balances

This guidance is explained in questions 8 and 9 of the updated FAQ, which was published on February 15.

While there is no new information from the IRS related to 1098-T reporting requirements, NACUBO stands by our interpretation that, following the logic of existing IRS guidance, amounts of institutional grant funds used to discharge student balances also should not be reported on the Form 1098-T. We’ve developed a six-minute video addressing this issue to help institutions address the many questions that have arisen.

Contact

Mary Bachinger

Director, Tax Policy

202.861.2581

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