Part IV – Items of General Interest Limited Penalty Relief for Filers of Form 1098-T, Tuition Statement

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Part IV – Items of General Interest

Limited Penalty Relief for Filers of Form 1098-T, Tuition Statement

Announcement 2016-17

This announcement provides notice that the IRS will not impose penalties under

section 6721 or 6722 on eligible educational institutions with respect to Forms 1098-T,

Tuition Statement, required to be filed and furnished for the 2016 calendar year under

section 6050S if the institution reports the aggregate amount billed for qualified tuition

and related expenses on Form 1098-T instead of the aggregate amount of payments

received as required by section 212 of the Protecting Americans from Tax Hikes Act of

2015 (Public Law 114-113 (129 Stat. 2242 (2015))(PATH). The penalty relief in this

announcement is limited to 2016 Forms 1098-T required to be filed by eligible

educational institutions by February 28, 2017 (or March 31, 2017, if filed electronically),

and furnished to recipients by January 31, 2017. This announcement does not provide

penalty relief for any other failure that would cause a filer to be subject to penalties

under section 6721 or 6722, or any other penalty under any provision of the Code.

Sections 6050S(a)(1) and 6050S(d) generally require eligible educational

institutions to file information returns with the IRS and to furnish written statements to

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individuals relating to qualified tuition and related expenses paid by, or on behalf of,

students. Section 6050S(b)(2) specifies the contents of the information return and,

effective for expenses paid after December 31, 2015, requires eligible educational

institutions to report the aggregate amount of payments received for qualified tuition and

related expenses during the calendar year from, or on behalf of, a student. Previously,

section 6050S(b)(2) allowed eligible educational institutions to report either the

aggregate amount of payments received for qualified tuition and related expenses or the

aggregate amount billed for such tuition and expenses

ions to report the aggregate amount of payments received for qualified tuition and

related expenses during the calendar year from, or on behalf of, a student. Previously,

section 6050S(b)(2) allowed eligible educational institutions to report either the

aggregate amount of payments received for qualified tuition and related expenses or the

aggregate amount billed for such tuition and expenses. Section 1.6050S-1(b)(5)

provides that information returns required under section 6050S must be filed by

February 28 (or March 31 if filed electronically) of the year following the calendar year to

which such returns relate. Section 6050S(d) provides that written statements required

under that section must be furnished to recipients by January 31 of the year following

the calendar year for which such statements are furnished.

Section 212 of PATH amended section 6050S(b)(2) and eliminated the option for

eligible educational institutions to report aggregate qualified tuition and related

expenses billed for the calendar year. This amendment is effective for qualified tuition

and related expenses paid after December 31, 2015, for education furnished in

academic periods beginning after such date.

Section 6721 imposes a penalty for failure to file correct or timely information

returns with the IRS. Section 6722 imposes a penalty for failure to furnish a correct or

timely written statement to the recipient. These penalties do not apply if it is shown

under section 6724 that the failure is due to reasonable cause and not due to willful

neglect.

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Form 1098-T is the information return for purposes of satisfying the reporting

obligations described in sections 6050S(a)(1) and 6050S(d). Prior to enactment of

section 212 of PATH, eligible educational institutions reported qualified tuition and

related expenses on Form 1098-T either as payments received for the calendar year in

Box 1 of the form or as amounts billed during a calendar year in Box 2 of the form

information return for purposes of satisfying the reporting

obligations described in sections 6050S(a)(1) and 6050S(d). Prior to enactment of

section 212 of PATH, eligible educational institutions reported qualified tuition and

related expenses on Form 1098-T either as payments received for the calendar year in

Box 1 of the form or as amounts billed during a calendar year in Box 2 of the form.

Following the enactment of PATH, numerous eligible educational institutions

informed the IRS that implementation of the law change will require computer software

reprogramming and other changes that cannot be implemented in time to meet the

applicable filing and furnishing due dates for Form 1098-T for calendar year 2016.

In light of this, the IRS will not impose penalties under section 6721 or 6722 with

respect to 2016 Forms 1098-T solely because the eligible educational institution reports

the aggregate amount billed for qualified tuition and related expenses for the 2016

calendar year. Thus, eligible educational institutions will continue to have the option of

reporting either the amount of payments of qualified tuition and related expenses

received or the amount of qualified tuition and related expenses billed for the 2016

calendar year without being subject to penalties. Institutions should refer to the

instructions for the 2016 Form 1098-T for further guidance for reporting of these

amounts. This penalty relief does not apply to any other failure subject to a penalty

under section 6721 or 6722.

The principal author of this announcement is Gerald Semasek of the Office of

Associate Chief Counsel (Procedure & Administration). For further information

regarding this announcement, contact Gerald Semasek at (202) 317-6845 (not a toll-

free call).