IRS Provides Transitional Relief for PATH Act’s Changes to Form 1098-T Reporting for Colleges and Universities

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April 28, 2016

On April 27, 2016, the IRS issued transitional penalty relief to colleges and universities under Announcement 2016-17 with respect to new reporting requirements implemented as part of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). Prior to the PATH Act, eligible educational institutions were required to report annually on Form 1098-T either (i) the aggregate amount of payments received for qualified tuition and related expenses, or (ii) the aggregate amount billed for such tuition and expenses. Section 212 of the PATH Act eliminates the option to report payments billed, meaning that colleges and universities must report the amount of payments received each year on a prospective basis.

If a college or university fails to properly file correct or timely tuition information with the IRS or furnish a proper written statement to the recipient, reporting penalties will apply under sections 6721 and 6722. Numerous eligible educational institutions notified the IRS that the law change would require computer software reprogramming that could not be completed prior to the 2016 deadlines for furnishing Forms 1098-T, which would trigger widespread penalties. Accordingly, Announcement 2016-17 permits eligible educational institutions to report the aggregate amount billed on all 2016 Forms 1098-T, effectively providing one year of transitional relief.