Overview

The Taxpayer Relief Act of 1997 (TRA97) created two education tax credits for students and families:

• The Hope tax credit provides up to $1,500 per student for qualified tuition and related expenses for the first two years of postsecondary education. To be eligible, students must be enrolled at least half-time in a degree- or certificate- granting program.

• The Lifetime Learning tax credit is more broadly applicable to any postsecondary education to acquire or improve job skills. It provides a credit equal to 20 percent of qualified expenses of no more than $10,000 per taxpayer (i.e., family).

To ensure greater accuracy on the part of taxpayers claiming the education tax credits, Congress included a new information reporting program in TRA97. Eligible higher education institutions—almost all accredited postsecondary education institutions—are required to file information returns with the IRS, and furnish statements to taxpayers, on all students for whom they receive tuition payments. From 1998 through tax year 2002, the IRS provided interim reporting requirements that allowed higher education institutions to report minimal information on Form 1098-T. Full reporting, including financial information on tuition and student aid, took effect for the first time for forms covering tax year 2003.

What Must Be Reported on 1098T?

In accordance with the Manzullo Act and the final rules for information reporting, colleges and universities may choose whether to report financial information on the 1098-T based on one of two reporting approaches: payments received or amounts billed for qualified tuition and related expenses.

The University of Alaska has decided to report on amounts billed for qualified tuition and related expenses (QTRE). This information is reported in box 2 on the form.

The final regulations qualified tuition and related expenses as “tuition and fees required for the enrollment or attendance of a student for a course of instruction at an eligible institution”.

• Tuition – Includes resident and non-resident charges.

• Required fees—Generally, the determination of whether a fee qualifies for the credit will be based on whether the fee is required to be paid to the institution as a condition of the student’s enrollment or attendance.

Examples of the QTRE are:

• tuition [lower level, resident, graduate, non-resident surcharge, self support]

• fees [course or lab, non-credit course, general technology, activity, student government, and others]

NOTE:

Personal expenses—Expenses for room, board, insurance, health center cost, medical expenses, transportation, and similar personal, living, or family expenses are not eligible for the education credits, regardless of whether the fee must be paid as a requirement for enrollment at the institution.

Institutions also need to include amounts of scholarships and any other aid processed and administered by the institution. This information is reported in box 4 on the form.

The scholarships or grants are made up of the following types:

• All financial aid administered by the financial aid offices

• Tuition waivers [academic, faculty and staff, etc]

• 3^rd party payments [payments received from employer, or an outside party to cover the cost of classes taken, whether for credit or non-credit]

In future years box 3 or box 5 could be filled in if any adjustments to amounts reported in a previous year have been done.

Colleges and universities also need to indicate on the 1098-T whether

• any amounts billed relate to an academic period that begins in the first three months of the next calendar year [box 6]

• the individual was enrolled for at least half of the normal full-time workload for his or her course of study, for at least one academic period during the calendar year [box 8]

• the individual was enrolled in a program leading to a graduate level degree, certificate, or credential [box 9]

Links to IRS information using internet explorer 6:

Final Rules on Education Tax Credits (Section 25A) December 26, 2002 pages 78687 – 78698. http://www.gpoaccess.gov/fr (Locate document by searching 1994 through 2004. Select Vol67 and enter page no. 78687)

Publication 970, Tax Benefits for Education – http://www.irs.gov/pub/irs-pdf/p970.pdf

How to obtain supporting documentation

Go to our website of uaonline.alaska.edu or www.uaonline.alaska.edu

Login into the secured area (this can be done by the person receiving the 1098T only)

Select Student services, financial aid & account information

Select Account Information

Select Tax Notification

Enter Tax Year and submit

This will display a copy of the 1098T you received.

To obtain detail for any of the boxes reported go to the box and click on the link. This will take you to the detail by semester equal the total.

When finished reviewing that information, you can click on return to 1098T form and it will return you to the top.

The supplemental information reflects all the charges that do not qualify for the tax credit.

If the student wants a copy of all that information they only have to print that page and the 1098T and all the detail information is returned.

****Should the student need information for a prior tax year, all use the back button and select a different tax year, and then proceed to the Tax Notification.

Access your 1098T information at Login to Secured Area from the UAOnline home page

Frequently asked questions:

Q. As a parent reporting the tax credit, how can I obtain the necessary information?

• The University of Alaska can only supply the information to the student because of the federal family education rights and privacy act (FERPA). Therefore the parent must have the student contact the University of Alaska or have the student go on the website listed on the 1098T.

Q. Why does the University of Alaska have to seek the student’s TIN/SSN every year?

• IRS tax code requires institutions to attempt to collect the individual’s correct TIN/SSN each year, on or before December 31, of each year during which it receives payments, or bills amounts, for QTRE with respect to that individual.

Q. What if the student fails to provide us with a TIN/SSN? Do we print/submit 1098-Ts with invalid or missing TIN/SSNs?

• IRS tax code states that if an individual neglects or refuses to provide the institution with a TIN upon request, the institution still must file a Form 1098-T and furnish a statement to the student, without the TIN but with all other required information.

Q. If a student is an undergraduate in the spring and then comes back as a graduate student in the fall; do you check the box indicating the student is a graduate student?

• Yes. Checking the box merely serves as an indicator to the IRS that the student is not in his or her first two years of postsecondary education, and therefore ineligible to receive a Hope tax credit.

Q. If a new student is considered “enrolled” under the university’s policy and billed in December 2004 for his Spring semester 2005 courses, should we generate a 1098-T for 2004?

• Yes, and you would check the square in Box #6 of the 1098-T indicating that the charges may relate to academic terms in the following calendar year.

Q. If a student registers prior to January 1, 2004 are the QTRE showing on the 1098T?

• NO. Those expenses were reported in calendar year 2003 and according to tax regulations these expenses can only be reported in one year.

Q, If a student registers prior to January 1, 2004 and makes payments after January 1, 2004, can they use the QTRE from calendar 2003.

• Yes, providing they did not use those QTRE in their calculation of 2003 tax credit.

Q. If a nonresident alien requests a 1098-T and one is provided to the student, is the institution required to file it with the IRS?

• Yes—as with 1099 information reporting—the institution is required to furnish the 1098-T to the IRS as well as to the taxpayer requesting the form.

Q. Taxpayers may claim a Lifetime Learning tax credit for noncredit courses, but noncredit courses are exempted from the reporting rules. Can you explain?

• The final IRS rules makes it clear that institutions are not required to issue 1098-Ts for any amounts paid or billed for noncredit course tuition. However, taxpayers do not need the 1098-T to claim the Lifetime Learning tax credit. Taxpayers may rely on other records to substantiate their claim for an education tax credit. Also, while institutions are not required to generate 1098-Ts for noncredit courses, they are not prohibited from doing so.