(March 11, 2016) The National Association of College and University Business Officers (NACUBO) has called on the Internal Revenue Service (IRS) to delay implementation of a change in tuition reporting requirements for tax purposes until 2017. As NACUBO notes, the change in question creates significant difficulties for administrative systems and reporting processes at many colleges and universities, severely constraining their capacity to comply. On March 10, EDUCAUSE joined other leading higher education associations in sending a letter to the IRS reinforcing NACUBO’s request for a one-year delay in the implementation of the new IRS Form 1098-T (Tuition Statement) requirement. (See “EDUCAUSE Comments: IRS 1098-T Delay Requested.”)
The 2016 federal appropriations bill passed at the end of last year eliminated the primary way in which the overwhelming majority of institutions reported students’ tuition charges on the 1098-T. By NACUBO’s count, roughly 80 percent of colleges and universities historically used the form’s “Box 2” option, which allowed them to report the tuition charges and other qualified expenses for which a student had been billed. The appropriations act, however, mandated that institutions report the tuition and expenses a student had paid (what had previously been known as the “Box 1” option) starting in 2016. As NACUBO notes, this change has significant ripple effects for colleges and universities in general:
We estimate that more than 80 percent of institutions currently report using the Box 2 methodology rather than Box 1. The reason for this is that Box 1 methodology requires institutions to trace payments received from students to particular charges, while Box 2 methodology does not. Box 2 methodology is a more accurate description of the way accounts payable works in the real world — institutions send periodic invoices to students requesting payment for aggregate fees, and students send periodic payments for some or all of the fees billed…. Forcing institutions to jettison their well-established systems in order to adopt the one-size-fits-all tracing methodology of Box 1 is no small undertaking, and it will take time.
The vast majority of these institutions, large and small, rely on student account software that is part of an enterprise-wide financial data management and administration system to calculate the totals reported on Form 1098-T. There are a variety of systems in use, provided by different developers.
Not all software systems have the capacity to perform payment tracing and it is unclear how difficult it will be for software providers to make the necessary modifications. Even institutions using software systems with the capacity to perform payment tracing do not have instructions on how to do so. Such instructions should be part of the forthcoming Priority Guidance Plan project.
We are unaware of any institutions that have received solutions from their software vendors yet, and schools do not have any reliable estimates of the timetable for implementation, staff training, and testing of new reporting requirements. Once updates are available, schools will need to customize them to match their own installation and unique data configurations.
The IRS has not yet responded to the request for a delay from NACUBO, and now from the higher education community as a whole. EDUCAUSE will continue working with our fellow associations, though, to convey the community’s concerns about this problem until such time as it has been appropriately resolved.
Jarret Cummings is director of policy and external relations at EDUCAUSE.