The IRS has clarified reporting requirements concerning pandemic-related emergency financial aid provided to college students.
Colleges and universities must report total qualified tuition and related expenses (QTRE), including QTRE paid with emergency financial aid grants, in box 1 of Form 1098-T, “Tuition Statement,” the IRS said in a series of frequently asked questions updated March 31.
However, higher education institutions don’t have to separately identify the portion of QTRE paid with the emergency financial aid grants in any part of Form 1098-T, and they don’t need to report the grants in box 5 of the form, which asks about scholarships and grants, the IRS said.
That’s true regardless of whether a school paid the emergency grants to a student who then used the money to pay for QTRE, or applied grant money directly to a QTRE on a student’s account, the IRS explained.
The clarification clears up uncertainty that arose earlier this year when the IRS issued Notice 2021-6, 2021-6 IRB 822.
The notice indicated that, in a departure from the treatment of student aid in the Coronavirus Aid, Relief, and Economic Security Act (P.L.116-136), colleges and universities might have to report the second round of aid on Form 1098-T if they allow students to use the emergency grants for QTRE, according to the National Association of College and University Business Officers (NACUBO).
After the notice was published in February, NACUBO met by phone with IRS and Treasury officials and asked that the IRS maintain its position that no special reporting or tracking of the emergency grants on Form 1098-T is required, the association reported April 2 on its website.
“We are grateful to the IRS for taking a common-sense approach,” NACUBO’s Mary Bachinger told Tax Notes. “It makes it easier for institutions to get the emergency grants out to students as expeditiously as possible and will help to reduce confusion for students at tax time.”