COHEAO TRA Teleconference - Looking At The TRA Once The Waiver Years Are Over

Dianne Fanning
Director of Campus Relations
AFSA Data Corporation

PENALTIES WHICH COULD BE IMPOSED FOR NOT MEETING REPORTING REQUIREMENTS

Under the proposed regulations, an institution or insurer may be subject to a penalty under section 6721 for failure to file correct Forms 1098-T and a penalty under section 6722 for failure to furnish correct information statements.

Failure to File Correct Information Returns

26 USC, Section 6721, states that any failure to file an information return with the Secretary on or before the required filing date and any failure to include all of the information required to be shown on the return or the include of incorrect information….shall result in a penalty of $50 for each return with respect to which such a failure occurs, but the total amount imposed on such person for all such failures during any calendar year shall not exceed $250,000. If any failure is corrected on or before the day 30 days after the required filing date (A) the penalty imposed shall be $15 in lieu of $50 and (B) the total amount shall not exceed $75,000. If any failure is corrected more than 30 days after the required filing date but on or before August 1 of the calendar year in which the required filing date occurs, (A) the penalty imposed shall be $30 in lieu of $50 and (B) the total amount shall not exceed $150,000.

Failure to Furnish Correct Payee Statements

26 USC, Section 6722, states that any failure to furnish a payee statement on or before the date prescribed therefore to the person to whom such statement is required to be furnished and any failure to include all of the information required to be shown on a payee statement or the inclusion of incorrect information….shall result in a penalty of $50 for each statement with respect to which such a failure occurs, but the total amount imposed on such person for all such failures during any calendar year shall not exceed $100,000.

The draft regulations provide special rules for soliciting an individual's TIN. The section 6723 penalty may apply to any individual who is required (but fails) to furnish his or her TIN to an institution or insurer. An institution or insurer that complies with the rules for soliciting the individual's TIN will not be penalized for any failure to obtain or include a correct TIN on a Form 1098-T or the related information statement.

Failure to Comply with Other Information Reporting Requirements

26 USC, Section 6723, states that a failure by any person to comply with a specified information reporting requirement on or before the time prescribed therefor…shall result in a penalty of $50 for each such failure, but the total amount imposed on such person for all such failures during any calendar year shall not exceed $100,000.

The proposed regulations generally follow the rules under section 6724 for waivers of penalties for certain failures due to reasonable cause.

Waiver; Definitions and Special Rules

26 USC, Section 6724, states that (a) no penalty shall be imposed under this part with respect to any failure if it is shown that such failure is due to reasonable cause and not to willful neglect; (b) Any penalty imposed by this part shall be paid on notice and demand by the Secretary and in the same manner as tax, and (c) regarding failure to meet magnetic media filing requirements under section 6721, no penalty shall be imposed solely by reason of any failure to comply with the requirements of the regulations prescribed under section 6011(e)(2), except to the extent that such a failure occurs with respect to more than 250 information returns (more than 100 information returns in the case of a partnership having more than 100 partners).

SUGGESTIONS TO HELP INSTUTITIONS ENSURE TRA REPORTING AND FILING COMPLIANCE

  1. If you are collecting data from disparate systems, check to make sure there is student demographic (address, half-time, graduate information) information to match student financial information.
  2. Have a central location to compile data to ensure generation of one 1098-T for each SSN within an EIN. If you have multiple campuses that must report to the IRS under one common Employer Identification Number, it is important to note that you must aggregate data for students who attend more than one campus for reporting purposes.
  3. The following has nothing to do with inserting dollar amounts in the boxes on the 1098-T and is not required by any law or regulation. Organizing the financial data in a format consistent with 8863 instructions is helpful to the student and their parent/taxpayer. There are institutions that are limited in their ability to easily identify qualified transactions (payments) from multiple academic terms as they occur in a specific tax year. These institutions do not "apply payments" to charges. Therefore, a student's account receivable is a running balance of activity, charges, payments, refunds, etc. Presenting charges to the account and categorizing the charges as qualified versus non-qualified and presenting credits or payments by gift aid (scholarships, grants) versus non-gift aid (loans, credit card payments, etc.) can be helpful to the student/taxpayer as they sit down to do their own calculations of amounts
  4. If you can display your 1098-T images on-line via a web site once they are mailed, this is a good tool to refer your students to when they lose their 1098-T or say they never got one. The web site is also a good place to put instructions for your students to save you manpower in telephonic or personal interaction. Having the 1098-T and financial information from the previous tax year on-line has also proven to be very helpful to the students.
  5. Having a system where you can record returned mail is a good vehicle to document the good faith effort made to meet the payee statement requirement (mailing of 1098-T to the student).
  6. If you do not automatically generate an information return for non-resident alien students and non-credit courses, have a predetermined method of operation for generating the forms when those categories of students request one.
  7. If you have more than 250 students for whom you are filing information returns, make arrangements to file them on magnetic media or electronically. This is not mandatory until the regulations have been finalized.
  8. Be prepared to maintain and support the student information returns (1098-Ts) for required audit period. This includes giving your students access to prior year information when they request it and transmitting additions and corrections to the IRS.

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