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Educational institutions get penalty waiver for missing or incorrect TINS

IRS has announced that for 2012 through 2014, educational institutions won’t face information return penalties for filing Form 1098-T (Tuition Statement) with missing or incorrect taxpayer information numbers (TINs). Legislation enacted earlier this year had provided prospective penalty relief only.

Background. Individual taxpayers may qualify for tax credits—the American Opportunity Tax Credit and the Lifetime Learning Credit—or an above-the-line deduction (for tax years beginning before Jan. 1, 2015) for qualified tuition and related expenses. Higher education institutions must provide a return to IRS and a statement to the student that indicate, among other things, the amount paid by or billed to the student for qualified tuition and related expenses for the tax year and the student’s taxpayer information number (TIN). Form 1098-T is used for this purpose.

Code Sec. 6721 imposes penalties for not properly and completely preparing correct information returns, including Form 1098-T.

Effective for returns required to be made and statements required to be furnished after Dec. 31, 2015, the Trade Preference Extension Act of 2015 (TPE Act, P.L. 114-27) waived the penalty for educational institutions that fail to file Forms 1098-T with accurate TINs of students attending the educational institution if the institution certifies, under penalty of perjury, that it properly requested TINs from the students as required under Treasury regs. (Code Sec. 6724(f), as amended by TPE Act Sec. 805)

However, the TPE Act didn’t provide educational institutions with penalty relief for earlier years.

Penalty waiver for earlier years. In light of the TPE’s prospective waiver of penalties, IRS has decided to also waive penalties assessed against any college, university or other educational institution for Forms 1098-T that were filed with an incorrect or missing TIN for tax years 2012, 2013 and 2014. IRS reminds educational institutions that they still must properly solicit payee TINs.

For tax year 2012, each educational institution that was previously assessed such penalty will receive a letter from IRS informing them of the penalty waiver. Affected institutions that do not receive a letter by Oct. 1, 2015, should respond to IRS using the original penalty assessment notice. IRS is not assessing penalties for incorrect or missing TINs for tax years 2013 and 2014.

RIA observation: Note that earlier this year, IRS waived penalties associated with Form 1098-T (as well as Form 5498, IRA Contribution Information, and Form 1099-G, Certain Government Payments) for the 2011 introductory tax year.

References: For penalty for failure to file correct information returns, see FTC 2d/FIN ¶  V-1803; United States Tax Reporter ¶  67,214; TaxDesk ¶  861,033; TG ¶  71703.

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