22 November 2016 Eligible educational institutions now have through calendar year 2017 to adjust tuition statements to comply with changes made by Protecting Americans from Tax Hikes Act of 2015 In Announcement 2016-42 (released November 17, 2016), the IRS declared that it will not impose Section 6721 or Section 6722 penalties on eligible educational institutions for timely filed tuition statements (Form 1098-T) for the 2017 calendar year simply because the institution reports the aggregate amount billed for qualified tuition and related expenses instead of the aggregate amount of payments received. Announcement 2016-42 effectively extends penalty relief provided for the 2016 calendar year by Announcement 2016-17 to the 2017 calendar year. Section 6050S(a)(1) and (d) generally requires eligible educational institutions to file information returns with the IRS and to furnish written statements to individuals reporting qualified tuition and related expenses paid by, or on behalf of, students. Section 6050S(b)(2) specifies the contents of the information return. Section 6050S(b)(2) had 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 212 of Protecting Americans from Tax Hikes Act of 2015 (PATH Act), however, 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. The PATH Act amendment applies to qualified tuition and related expenses paid after December 31, 2015, for education furnished in academic periods beginning after that date. Penalties apply for failures to timely file correct information returns with the IRS and for failures to timely furnish correct information statements to individuals under Sections 6721 and 6722, respectively (unless the failure is due to reasonable cause and not due to willful neglect). Educational institutions have encountered several challenges when trying to update their accounting systems, software, and business practices for filing and furnishing Forms 1098-T. Specifically, the software vendors and service providers utilized by educational institutions have not yet been able to develop a methodology that calculates and reports the aggregate amount of payments received for qualified tuition and related expenses as required by Section 212 of the PATH Act. In light of these issues, the IRS has decided not to impose penalties on educational institutions that continue to report the aggregate amount billed for qualified tuition and related expenses instead of the aggregate amount of payments received on the 2017 Form 1098-T. This penalty relief is limited to 2017 Forms 1098-T required to be filed by educational institutions with the IRS by February 28, 2018 (or April 2, 2018, if filed electronically), and furnished to recipients by January 31, 2018. Announcement 2016-42 does not extend penalty relief to any other failure that would cause the institution to be subject to penalties under Sections 6721 or 6722, or any other penalty under any provision of the Internal Revenue Code. — For more information about EY's Exempt Organization Tax Services group, visit us at www.ey.com/ExemptOrg.
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