IRS Issues Guidance on Tuition Tax Credit Programs

Washington, DC, December 11, 1997 - The Internal Revenue Service has issued Notice 97-73 describing the information reporting requirements for 1998 that apply to educational institutions in connection with the Hope and Lifetime Learning Credit programs established by the Taxpayer Relief Act of 1997. The notice describes who must report information and the type of information that will be required to be reported under Code Section 6050S.

The Taxpayer Relief Act allows eligible taxpayers who pay qualified tuition and related expenses to an eligible educational institution to claim a Hope or Lifetime Learning Credit against their federal income tax liability. These programs relate to the new Education IRA program, also established by the Taxpayer Relief Act. Specifically, in years that an individual elects a Hope or Lifetime Learning tax credit, he or she may not take a qualified distribution from an Education IRA.

The Notice states that Section 6050S requires eligible educational institutions that receive payments of qualified tuition and related expenses to submit an annual information report to the Internal Revenue Service with respect to each student on whose behalf the payments are received. Most accredited public, nonprofit, and proprietary postsecondary institutions are eligible educational institutions.

The information report, designated Form 1098-T, Tuition Payments, will include the following information: the name, address, and taxpayer identification number (TIN) of the individual with respect to whom the qualified tuition payment was received; the name, address, and TIN of any individual certified by the individual named as the taxpayer who will claim that individual as a dependent; and the aggregate amount of tuition payments paid during the calendar year. The information report must be sent to the Service by March 1, 1999 for tax year 1998. The reporting educational institution must also furnish each individual named in its report to the Service a written statement including the name, address, and phone number of the reporting entity's information contact and the aggregate amounts reported.

In 1998, the Service will not impose penalties on institutions that do not report the amount of qualified tuition and related expenses received.

The Notice also states that the Service is developing an optional Form W-9S for use in collecting information to comply with these reporting requirements, which educational institutions will be able to use to collect student names, addresses, and TINs.