IRS updates FAQs on emergency relief grants to students; no information reporting requirement for education institutions
FAQs for higher education emergency grants
No information reporting requirement for education institutions
The IRS today updated a set of “frequently asked questions” (FAQs) concerning the use of certain funds allocated by the U.S. Department of Education to support students and higher education institutions with expenses and financial needs related to the coronavirus (COVID-19) pandemic.
Provisions of the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) (enacted in March 2020) allow the use of federal funds from the Education Department to support students and higher education institutions. The IRS originally issued the FAQs in 2020. Read TaxNewsFlash
As noted in today’s IRS release—Fact Sheet (FS)-2022-11 [PDF 340 KB]—the updated FAQs explain that higher education institutions do not have information reporting requirements under section 6041 when using these federal funds to pay students’ overdue balances for tuition and fees. Also, these payments are not included in students’ gross income.
Text of the updated FAQs
Q8: I am a student at a higher education institution and my institution is using federal funds under the CARES Act, the CRRSAA, or the ARP to cancel or discharge my overdue balances, such as for tuition and fees. Is the amount of the discharge includible in my gross income? (added February 15, 2022)
A8. No. If your institution is using federal funds to cancel or discharge your overdue balance for tuition and fees, your debt is being paid by the Federal government and such payment generally would be included in your gross income. However, because your debt is being paid by the Federal government in response to the COVID-19 pandemic, the amounts paid by the Federal government, including grants used to pay an overdue balance for tuition and fees owed to the institution, are not included in your gross income.
Q9. Do higher education institutions have any requirements under Internal Revenue Code section 6041 to report information on Form 1099-MISC if the institutions use federal funds under the CARES Act, the CRRSAA, or the ARP to pay the students’ overdue balances for tuition and fees? (added February 15, 2022)
A9. No. Higher education institutions do not have information reporting requirements under section 6041 when using these federal funds to pay students’ overdue balances for tuition and fees. These payments are not included in students’ gross income. Because the payments are not income, section 6041 does not apply to them, and higher education institutions are not required to file or furnish Forms 1099-MISC, “Miscellaneous Income,” reporting the payments.
The IRS also cautioned in the fact sheet that:
“…these FAQs may not address any particular taxpayer’s specific facts and circumstances, and they may be updated or modified upon further review. Because these FAQs have not been published in the Internal Revenue Bulletin, they will not be relied on or used by the IRS to resolve a case. Similarly, if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer’s case, the law will control the taxpayer’s tax liability. Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax.”
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