How to File IRS Form 1098-T? (Complete Guide)

When you’re footing your own school tuition bill, it’s time to dive into your tax paperwork to uncover potential refunds. While you might be well-acquainted with documents like Form W-2, […]

When you’re footing your own school tuition bill, it’s time to dive into your tax paperwork to uncover potential refunds. While you might be well-acquainted with documents like Form W-2, Form 1040, and Form 1099, if you’ve recently ventured into the realm of student loans, keep an eye out for Form 1098-T, commonly known as the Tuition Statement. This essential piece of paper provides a breakdown of your educational expenses and opens the door to valuable tax credits and deductions. Colleges and post-secondary educational institutions have the obligation to send these statements to students annually. If you receive a tuition statement in your mailbox, consider enlisting the expertise of Community Tax’s tax professionals. We grasp the financial strain of tuition costs, but with our guidance, you can potentially recoup funds to fortify your financial future.

What You Should Understand About Form 1098-T?

Form 1098-T serves as an information return, a requirement set by the IRS for businesses engaging in “reportable transactions.” In this context, think of it as similar to the Form 1098 received by individuals with mortgages, detailing the amount of mortgage interest paid during a tax year. However, with a Form 1098-T, your educational institution (in this case, your college) reports the total qualified tuition and expenses you or your parents paid during the tax year.

Specific Guidelines for Form 1098-T

If you represent an eligible educational institution, it’s essential to file Form 1098-T, known as the Tuition Statement. This requirement applies to every student you enroll who has undergone a reportable transaction. Additionally, if you’re an insurer, you should also submit Form 1098-T for each individual who has received reimbursements or refunds for qualified tuition and related expenses.

Exceptions to Filing

There are specific situations where you are not obligated to file Form 1098-T or furnish a statement. These exceptions include:

  1. Courses Without Academic Credit: If your institution offers courses for which no academic credit is provided, you are not required to file Form 1098-T, even if the student is enrolled in a degree program.
  2. Nonresident Alien Students: Generally, nonresident alien students do not necessitate Form 1098-T, unless it is explicitly requested by the student.
  3. Fully Waived or Scholarship-Covered Expenses: Students whose qualified tuition and related expenses are entirely waived or entirely paid through scholarships do not fall under the reporting requirement.
  4. Students Covered by Formal Billing Arrangements: If you do not maintain a separate financial account for a student, and their qualified tuition and related expenses are managed through a formal billing arrangement with their employer or a government entity (like the Department of Veterans Affairs or the Department of Defense), then you are exempt from filing Form 1098-T.
  5. Non-Qualified Courses: Expenses related to courses involving sports, games, or hobbies are not considered qualified tuition and related expenses unless these courses are an integral part of the student’s degree program or taken to enhance job skills.
  6. Non-Educational Expenses: Charges for room, board, insurance, medical expenses, transportation, and personal living expenses are not considered qualified tuition and related expenses.

Who Must File IRS Form 1098-T?

The obligation to file Form 1098-T lies with eligible educational institutions. Governmental units, agencies, or instrumentalities of governmental units that fit the criteria of an eligible educational institution must adhere to the reporting obligations of Form 1098-T. If another entity receives payments on your behalf but lacks the necessary information to meet Form 1098-T’s reporting requirements, you are responsible for filing.

Insurers engaged in refunding or reimbursing qualified tuition and related expenses within their trade or business are also mandated to file Form 1098-T. Refer to the instructions for box 10 for further details.

Eligible Educational Institution:

This term encompasses colleges, universities, vocational schools, and other postsecondary educational institutions. To qualify, the institution must align with the description provided in Section 481 of the Higher Education Act of 1965, as it existed on August 5, 1997. Additionally, it should be eligible to participate in the Department of Education’s student aid programs, which typically include most accredited public, nonprofit, and private postsecondary institutions.

Qualified Tuition and Related Expenses

This category encompasses tuition, fees, and course materials that are mandatory for a student’s enrollment or attendance at an eligible educational institution.

Filing Form 1098-T, known as the Tuition Statement, is a responsibility for eligible educational institutions. Each student you enroll, who has been part of a reportable transaction, necessitates this filing. Moreover, if you’re an insurer, you’re required to file Form 1098-T for individuals who have received reimbursements or refunds for qualified tuition and related expenses.

Academic Period

Form 1098-T must be filed for each student enrolled during any academic period (e.g., semester, trimester, or quarter) in 2023. Refer to the Exceptions section for variations in this requirement.

Electronic Delivery of Form 1098-T

Educational institutions can offer students the option to consent to receive Form 1098-T electronically, typically as part of a broader “Consent To Do Business Electronically”. This process should adhere to the necessary consent, disclosure, format, notice, and access period criteria mandated for electronic furnishing of Forms 1098-T. More information on furnishing statements to students can be found in the 2023 General Instructions for Certain Information Returns.

Truncating Student’s TIN

Filers of Form 1098-T are permitted to truncate a student’s TIN (social security number, ITIN, ATIN, or EIN) on payee statements following Regulations section 301.6109-4. However, truncation is not allowed on any documents filed with the IRS. A filer’s TIN may not be truncated on any form. Please refer to the 2023 General Instructions for Certain Information Returns (part J) for further details.

Student’s TIN and Checkbox

Enter the student’s TIN as provided on Form W-9S or other forms. If you solicited the student’s TIN in writing or obtained it from a prior year’s financial aid application, check the box accordingly. This box certifies your compliance with the standards in Regulations section 1.6050S-1. For electronic filers, this certification is made during filing. Paper filers will certify this on Form 1096.

Student’s Address

In the student’s address field, enter their permanent address. If the permanent address is unknown, a temporary address can be used.

Information Contact and Service Provider

Provide your institution’s name, address, and telephone number. You can also include information about a third-party service provider in the designated area below the student’s name and address. This provider may have filed the form or can answer questions regarding the statement.

Specific Instructions for Form 1098-T

  • Box 1. Payments for Qualified Tuition and Related Expenses: Here, you’ll report the total payments received for qualified tuition and related expenses from all sources in the calendar year. This amount should exclude any reimbursements or refunds related to these payments made during the same calendar year. Scholarships and grants reported in box 5 should not reduce this amount. You should include payments for past-due qualified tuition or related expenses from a previous year if the educational institution previously billed the student for those amounts.
  • Box 2 and Box 3: These boxes are currently reserved for future use and have no specific information to report.
  • Box 4. Adjustments for a Prior Year: In this box, you’ll enter reimbursements or refunds of qualified tuition and related expenses made in 2023 that are related to payments received and reported in any prior year since 2002. You’ll also report any reductions in charges for tuition and related expenses made during the calendar year that are connected to amounts billed and previously reported for any year after 2002. These rules apply to adjustments made for non-resident aliens for whom the educational institution filed a Form 1098-T in the prior year.
  • Box 5. Scholarships or Grants: Here, you’ll enter the total amount of scholarships or grants that you administered and processed during the calendar year to cover a student’s costs of attendance. This includes payments received from various sources such as governmental entities, private organizations, and more. Note that scholarships and grants do not include payments from family members or loan proceeds.
  • Box 6. Adjustments to Scholarships or Grants for a Prior Year: Enter the amount of any reductions to the scholarships or grants previously reported for any year after 2002.
  • Box 7. Academic Period Beginning in January Through March 2024: Check this box if the payments received for qualified tuition and related expenses reported for 2023 are related to an academic period that starts in January through March of 2024.
  • Box 8. At Least Half-Time Student: Check this box if the student was enrolled at least half-time during any academic period in 2023. A half-time student workload should meet or exceed the Department of Education’s standards for a half-time student.
  • Box 9. Graduate Student: Check this box if the student was enrolled in a program leading to a graduate-level degree, certificate, or recognized graduate-level educational credential.
  • Box 10. Insurance Contract Reimbursements or Refunds: If you’re an insurer, report the total amount of reimbursements or refunds of qualified tuition and related expenses made to the student during 2023.

What Happens if You Got a Scholarship in the Past Year?

If you were fortunate to receive a scholarship to support your education, it’s essential to understand the tax implications. Scholarships are typically considered part of your overall income. However, they are usually tax-free if you’re using them for qualified education expenses like tuition, required fees, and educational materials.

But here’s the catch: If your scholarship covers living expenses, such as room and board, that portion is usually taxable. Additionally, there are rules in place to prevent individuals from taking excessive advantage of education-related tax benefits, so it’s wise to be aware of these regulations.

Summing Up

In conclusion, understanding and correctly filing IRS Form 1098-T is vital for students and educational institutions. This comprehensive guide has provided insights into its purpose and filing procedures. However, tax matters can be complex, so don’t hesitate to seek assistance from our experts if you encounter any difficulties.

Frequently Asked Questions

What is IRS Form 1098-T, and who should file it?

IRS Form 1098-T, often referred to as the Tuition Statement, is used to report information about qualified tuition and related expenses. Educational institutions, including colleges and universities, should file this form. It’s essential for students who may be eligible for education-related tax credits and deductions.

When is the deadline for filing Form 1098-T?

Educational institutions must furnish Form 1098-T to eligible students by January 31st of each year. If filing electronically, the deadline for the institution to submit the form to the IRS is typically March 31st. However, it’s crucial to verify current deadlines with the IRS or a tax professional, as they can change.

What information does Form 1098-T include?

Form 1098-T reports essential information, including the total payments received for qualified tuition and related expenses, scholarships or grants, adjustments to prior-year reporting, and whether the student was enrolled at least half-time. It also indicates if any payments relate to an academic period beginning in the following year.

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