May 3, 2017

When the PATH Act of 2015 was introduced the IRS required that colleges and universities report the amounts received instead of amounts billed for qualified tuition and related expenses. However, the IRS met quite a bit of push back from institutions that were now faced with huge administrative challenges to change their accounting systems to meet these reporting requirements.

Institutions pled to the IRS Office of Chief Counsel for a break on penalties.  The IRS granted this transitional relief in the best interests of efficient, effective, and fair tax administration in tax year 2016. Recently the IRS published Announcement 2016-42 which grants exemption from penalties again for tax year 2017.

The National Association of College and University Business Officers (NACUBO) played a key role in this transitional relief effort. Since IRS and Treasury are currently engaged in a rule making process that could result in further amendments to the Form 1098-T, the association argued that the IRS should postpone the Box 1 reporting requirement until final rules are published.

Colleges and universities furnishing 1098-T’s that are filed in March 31st 2018 can continue to choose either Box 1 (amounts paid) OR Box 2 (amounts billed) for qualified tuition and related expenses.  Whether or not the rule will be enforceable by penalty in tax year 2018 is still unknown. Despite this cushion institutions should continue to make the proper arrangements to fulfill this for tax year 2018 and beyond.