11 January 2016 IRS extends penalty relief for colleges filing tuition statements with incorrect student TINs In Announcement 2016-03, the IRS has announced that it is waiving penalties assessed against colleges, universities and other educational institutions for any Form 1098-T, Tuition Statement, that is filed with an incorrect or missing individual taxpayer identification number (TIN) for tax year 2015 — extending relief previously announced for tax years 2012-2014. Section 6721 imposes a penalty for failing to file a timely and correct information return with the IRS (e.g., Form 1098-T). In previous years, the IRS has imposed Section 6721 penalties on colleges, universities and educational institutions for each Form 1098-T filed with an incorrect or missing individual TIN. See Tax Alert 2013-1770. On June 29, 2015, President Obama signed into law the Trade Preferences Extension Act (TPEA) of 2015, which generally increases the penalties for late or incorrectly filed information returns, effective for information returns filed on or after December 31, 2015. See Tax Alert 2015-1345. The law also added a special rule under Section 6724(f) for certain returns of educational institutions, prohibiting the imposition of penalties under Section 6721 (or Section 6722) solely by reason of failing to provide the TIN of an individual on Form 1098-T if the eligible educational institution required to file that form contemporaneously makes a true and accurate certification under penalty of perjury that it has complied with regulations governing solicitation of the individual's TIN. The Treasury Regulations require annual solicitations of TINs to be made either by mail, by telephone or electronically. Please see IRS publication 1586 for further guidance regarding what is required to be included in the solicitations. In light of the relief enacted in TPEA for subsequent tax years, the IRS announced in a notice posted to its website on August 28, 2015, that it was waiving penalties assessed against colleges, universities and other educational institutions for any Form 1098-T that was filed with an incorrect or missing individual TIN for tax years 2012-2014. See Tax Alert 2015-1709. The special rule under Section 6724(f) that provides relief to educational institutions meeting certain requirements generally applies to returns and statements required to be filed after December 31, 2015. The IRS stated, however, that it is not yet prepared to implement the rule with respect to Forms 1098-T filed for the 2015 tax year. Accordingly, it announced that it will not impose penalties under Section 6721 or 6722 against eligible educational institutions that timely file or furnish 2015 Forms 1098-T or statements with missing or incorrect TINs during 2016. The IRS added that it will publish separate guidance on procedures implementing Section 6724(f) for Forms 1098-T and statements required to be filed after December 31, 2016. The extension of the penalty waiver for tuition statements filed with missing or incorrect student TINs for the 2015 tax year should provide welcome relief to educational institutions. The extension will allow the IRS additional time to make necessary changes to its programming and forms to align with the Section 6724(f) exception enacted by the TPEA. Colleges, universities and other educational institutions should watch for the upcoming guidance for the 2016 tax year and take steps to ensure that they will comply with the requirements to be eligible for the Section 6724(f) exception in future years. — For more information about EY's Exempt Organization Tax Services group, visit us at www.ey.com/ExemptOrg.
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