Insights and Resources
HEERF grants not required to be reported on Form 1098-T
TAX ALERT |
Authored by RSM US LLP
A new IRS FAQ, released on Dec. 14, 2020, provides welcome guidance to colleges and universities that made Higher Education Emergency Relief Fund (HEERF) grants to students under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Specifically, the IRS does not expect colleges and universities to report such amounts on Forms 1098-T.
The CARES Act directs higher education institutions to use certain funds allocated by the Department of Education to directly support students with expenses and financial needs related to the disruption of campus operations due to the COVID-19 pandemic (including eligible expenses under a student’s cost of attendance, such as food, housing, course materials, technology, health care, and child care). Recipient higher education institutions must pay no less than 50% of the HEERF dollars received to students as emergency financial aid grants.
In May, the IRS posted FAQs clarifying that the emergency financial aid grants are not taxable to the students because they are qualified disaster relief payments. However, the original FAQs did not address higher education institutions’ Form 1098-T information reporting requirements.
New Q&A3 specifically advises colleges and universities to not report HEERF grants made to students on Forms 1098-T:
The emergency financial aid grants are qualified disaster relief payments, as described in A1 above, and are not included in students' gross income. As noted in A2 above, students may not claim deductions or credits for these amounts. The reporting of these grants to the IRS on Forms 1098-T could result in the issuance of underreporter notices (Letters CP2000) to students and furnishing such Forms 1098-T to students could cause confusion. Thus, the IRS will not require that these grants be reported pursuant to section 6050S of the Internal Revenue Code on Form 1098-T.
Note that the FAQ also provides relief from Form 1098-T reporting for certain COVID-19 emergency grants made to students under sections 3504 and 18008 of the CARES Act, related funding under the Higher Education Act and emergency relief funding allocated to historically black universities.
Call us at +1 213.873.1700, email us at firstname.lastname@example.org or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by Alexandra Mitchell, Morgan Souza and originally appeared on 2020-12-15.
2020 RSM US LLP. All rights reserved.
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Vasquez & Company LLP is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.
For more information on how Vasquez & Company LLP can assist you, please call +1 213.873.1700.
Subscribe to receive important updates from our Insights and Resources.