The Internal Revenue Service requires educational institutions to submit Forms 1098-T each year to report payments received or billed for qualified tuition and related expenses. The Form 1098-T is required to be provided to every student-taxpayer and copies of all Forms 1098-T must be submitted to the IRS to assist in determining if the taxpayer is eligible for an education credit.
Who is required to file Form 1098-T?
Eligible educational institutions must send a Form 1098-T, Tuition Statement, to any student who paid qualified tuition and related expenses in the preceding year. An eligible educational institution is a college, university, vocational school, or other postsecondary educational institution that is described in Section 481 of the Higher Education Act of 1965 and that is eligible to participate in the Department of Education’s student aid programs. This includes most accredited public, nonprofit, and private postsecondary institutions.
When to File
The IRS requires Form 1098-T to be mailed by January 31 to all students who had qualified tuition and other related educational expenses billed to them during the previous calendar year. A copy of all Forms 1098-T issued to students must also be filed with the IRS. Paper filed forms must be filed by February 29, 2016, and electronically filed forms by March 31, 2016. Be sure to verify your tax returns are being filled correctly and you’re trying the right accountant.
Incomplete Filing\Late Filing Options
Recently, many organizations have received IRS Notice 972CG for late, incorrect, or incomplete Forms 1098-T. The IRS can impose penalties for filing a 1098-T with a missing or incorrect Taxpayer Identification Number (TIN), on incorrect media, in an incorrect format, or by failing to file by the required filing date.
If you filed Forms 1098-T on time but with incorrect or missing information the IRS announced in August 2015 that it intends to waive penalties for tax years 2012-2014. For tax years 2015 and forward, the IRS is required by statute to waive penalties for incomplete or incorrect TINs if the institution can show that it properly attempted to gather proper information.
If you fail to file Forms 1098-T by either of the respective due dates above and cannot show reasonable cause, you may be subject to a penalty. The amount of the penalty is based on when the Form 1098-T is filed. The penalties are:
- $30 per form if you correctly file within 30 days, maximum penalty $250,000 per year ($75,000 for small businesses).
- $60 per form if you correctly file more than 30 days after the due date but before August 1,maximum penalty $500,000 per year ($200,000 for small businesses).
- $100 per form if you file after August 1 or do not file Form 1098-T, maximum penalty $1,500,000 per year ($500,000 for small businesses).
However, under certain circumstances, the penalties may be waived if the failure is due to reasonable cause. To support the showing that the failure was due to reasonable cause and not willful neglect, the organization must establish that they acted in a responsible manner both before and after the failure occurred, and that there were significant mitigating factors or the failure was due to events beyond the filer’s control. If your organization has failed to file Forms 1098-T for a prior year or has received a notice from the IRS in regards to Form 1098-T, McClintock & Associates can help you respond to the IRS and assist with potential penalty abatement.
Volume 3, Issue 1 Winter 2016