On January 7, 2016, the IRS announced it won’t impose penalties under Internal Revenue Code (IRC) Section 6721 or 6722 on educational institutions solely for failure to include a student’s correct taxpayer identification number (TIN) on Form 1098-T. This relief is limited to 2015 forms.
IRC Section 6050S requires an educational institution to file an information return with the IRS and provide an information statement to taxpayers. The return must include the name, address and TIN of the institution and student as well as the payment amount received for qualified and tuition-related expenses.
Under IRC Section 6721, any failure to include all the information required on an information return (including Form 1098-T) is subject to a $250 penalty for each information return. In addition, IRC Section 6722 sets a $250 penalty per statement for failure to furnish correct payee statements.
Reason for Current Relief
In August 2015, the IRS announced it was waiving penalties for educational institutions that filed Forms 1098-T with an incorrect or missing TIN. At that time, the IRS granted this relief for tax years 2012 to 2014.
The penalty relief for 2015 Forms 1098-T is an indirect result of the Trade Preferences Extension Act of 2015. The act amended Section 6724 so that educational institutions certifying under penalty of perjury that they have complied with IRS standards for obtaining the individual’s TIN won’t be penalized for a missing or incorrect number. For 2016, the educational institution will make this certification by checking a box on the Form 1098-T. As the IRS was unable to make this change to the 2015 Form 1098-T, it has announced no penalties will be imposed for failure to include a student’s correct TIN.
Note: This relief doesn’t apply to other information required on the Form 1098-T, or to failures to file the Form 1098-T timely.
If you have any questions about the Form 1098-T requirements or this penalty relief, contact your BKD advisor.