Industry Insights

NACUBO Recommendations on Proposed Changes to Form 1098-T Reporting

November 2016

In a letter to the IRS dated October 31, 2016, the National Association of College and University Business Officers (NACUBO) addressed changes to Form 1098-T, Tuition Statement, proposed by the IRS in its August 2, 2016, notice of proposed rulemaking. While the IRS proposals are meant to reduce confusion and errors associated with claiming education credits based on Form 1098-T, NACUBO notes many of these changes would have the opposite effect on colleges and universities. Ten other higher education industry associations joined NACUBO in these comments. The comment letter provides numerous suggestions, some of which are detailed below.

Current 1098-T reporting allows colleges and universities to complete Form 1098-T for nonresident aliens (NRAs) only when requested. With the proposed changes, the IRS seeks to require Form 1098-T for all NRA students. In response, NACUBO recommended a compromise:  colleges and universities would be required to prepare Form 1098-T for NRAs only if the institution received a taxpayer identification number from the NRA. Alternatively, NACUBO suggested the current reporting practice continue.

The IRS also proposed two additional changes in an effort to decrease the number of inaccurate or fraudulent claims. While the reason for the proposals was logical, NACUBO opposed both changes on the basis of increased hardship for colleges and universities. The first requirement would result in detailed tracking of payments made by students. Rather than simply record the payments, colleges and universities would have to note the academic year to which each payment was related. In a recent survey conducted by NACUBO, participants noted that a major overhaul of accounting systems would be required to accurately track this information.

The second proposal would require higher education institutions to list the number of months a student was considered full-time. While colleges and universities already report this information to other federal agencies, the IRS would implement a separate calculation method. This would result in a much longer time commitment to track this information.

Ultimately, NACUBO requests any changes to the Form 1098-T process allow schools sufficient time to properly test and implement changes. NACUBO also reiterated its request to delay implementation of changes to reporting requirements for tax year 2017.

For more information about the NACUBO’s recommendations, visit the NACUBO website.

Contact your BKD advisor with any questions.

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