IRS Releases Form 1098-T Guidance for Reporting Emergency Financial Aid Grants

The Coronavirus Aid, Relief and Economic Security (CARES) Act allows colleges and universities to use certain funds from the US Department of Education to support students with expenses and financial needs due to the COVID-19 pandemic. However, certain rules and stipulations determine how higher education institutions use the funds.

In response to institutions’ questions about complying with these rules, the IRS and Department of Education published FAQs about the programs on December 14, 2020.

Below is an update on Form 1098-T reporting requirements.

Do higher education institutions have information reporting requirements under Section 6050S for emergency financial aid grants awarded to students under Section 3504, 18004, or 18008 of the CARES Act?

No. Colleges and universities won’t need to report information on Form 1098-T for any emergency financial aid grants, according to the issued guidance.

Under the CARES Act, higher education institutions could use supplemental educational opportunity grant funds received through the Higher Education Act, as well as funds from the Higher Education Emergency Relief Fund, to award emergency financial aid grants to students with “unexpected expenses and unmet financial need” because of the COVID-19 pandemic.

The emergency financial aid grants are qualified disaster relief payments and aren’t included in students’ gross income. In addition, because the grants aren’t gross income, students also can’t claim any deduction for expenses paid with the grants, including the tuition and fees deduction.

According to the guidance, higher education institutions have no information reporting requirements related to these grants because reporting the grants on Form 1098-T could result in underreporting notices to students.

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To learn more about requirements your institution may face related to CARES Act funds or additional guidance navigating the pandemic’s impact, contact your Moss Adams professional.

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