Legal Information About SSN and Legal Opinion 13-05

This document is made up of two parts: 1) response from the CCCCO from Aug 2019; and 2) the full contents of the Legal Opinion 13-05 - issued in 2014 from CCCCO Legal regarding the implementation of the SSN question in OpenCCC and CCCApply.

 


Do we need to implement the Social Security number question in CCCApply?”

The first section below was a response by Gina Browne, Specialist, Student Financial Aid Programs, and Michael Quiaoit, Dean, Educational Support Services, in August 2019 in response.

Chancellor’s Office Response: Michael Quiaoit wrote me back and said “Yes” you must include the SSN question in CCCApply, and provided the following supporting information from Gina Browne.

 

Federal Requirements

Federal law requires the California Community Colleges to provide specific information to the Internal Revenue Service (IRS) for the purpose of filing an information return (IRS Form 1098-T "Tuition Statement") for each student in attendance, with a few exceptions. (26 C.F.R. 1-60505-1(b)(2)(ii).)

o Information reporting requirements for institutions that elect to report payments received for qualified tuition and related expenses -


(i) In general. Except as provided in paragraph (a)(2) of this section, an institution reporting payments received for qualified tuition and related expenses must file an information return with the IRS on Form 1098-T, “Tuition Statement,” with respect to each individual enrolled (as determined in paragraph (d)(1) of this section) for an academic period beginning during the calendar year or during a prior calendar year and for whom a transaction described in paragraphs (b)(2)(ii)(C), (E), (F) or (G) of this section is made during the calendar year. An institution may use a substitute Form 1098-T if the substitute form complies with applicable revenue procedures relating to substitute forms (see§ 601.601(d)(2) of this chapter).

 

(ii) Information included on return. An institution reporting payments received for qualified tuition and related expenses must include on Form 1098-T -

  • (A) The name, address, and taxpayer identification number (TIN)(as defined in section 7701(a)(41)) of the institution;

  • (B) The name, address, and TIN (taxpayer identification number or SSN) of the individual who is, or has been, enrolled by the institution;

 

 

State Requirements

California Education Code sections 76071:

ARTICLE 4.5. California Community College Student Federal and State Financial Aid Opportunity Act [76070 - 76071] ( Article 4.5 added by Stats. 2007, Ch. 607, Sec. 1. )

(a) The CCC Chancellor’s Office shall develop a statement that individual students will be asked to sign, which acknowledges that federal and state funds are available to assist with the costs of college and that information regarding these programs, and assistance in applying for those funds can be obtained at the financial aid office. The chancellor shall request the colleges to require students to sign this acknowledgment in the application for enrollment at all campuses of the California Community Colleges in the next regular local cycle in which those forms are printed and the next regular cycle in which electronic applications are updated.

(b) The CCC Chancellor’s Office shall develop a statement to individual students receiving the Board of Governors Enrollment Fee Waiver, who did not apply for federal student, informing them about the benefits of the federal programs, the application process, and the availability of assistance to apply. The chancellor shall request colleges to provide this statement to all students who meet this description.


Additionally:

The Social Security number is used as a means of identifying student records and to facilitate financial aid.

Gina Browne

Specialist, Student Financial Aid Programs

Educational Services and Support

O (916) 324-4744 | gbrowne@cccco.edu


The detail below was taken directly from Legal Opinion 13-05 - issued from the CCCCO in 2013 - related to the revisions that CCCApply had to make in order to support the colleges in compliance with IRS regulations for collecting and reporting student SSNs.

Date:

September 16, 2018

To:

Linda Michalowski, Vice Chancellor, Student Services and Special Programs

From:

Michelle Goldberg, Attorney, Legal Division

RE:

IRS Penalties for Incorrect or Missing TINs on IRS Form 1098-T

LEGAL OPINION 13-05

BACKGROUND

California Community Colleges are receiving Internal Revenue Service (IRS) penalty notices for failure to provide students’ correct tax payer identification numbers (TINs) on IRS Form 1098-T or in some cases for failure to provide a TIN at all.


ISSUES

1) Does California law or other federal law preclude colleges from providing TINs to the IRS?

No, providing student TINs to the IRS does not violate any California law or other federal law.

2) Are colleges required to provide correct TINs to the IRS?

Yes; however, colleges do not need to provide TINs of nonresident aliens. Further, colleges that “act in a responsible manner” as defined by the IRS can be eligible for a waiver of penalties for failure to provide a correct TIN.

LAW AND ANALYSIS

The Tax Payer Relief Act of 1997

In 1997, Congress enacted the Tax Payer Relief Act which, among other things, provided a tax credit to qualifying taxpayers who have incurred expenses related to the first two years of postsecondary education. Those provisions are referred to as the Hope Scholarship Credit and the Lifetime Learning Credit. The Hope Scholarship Credit can be claimed for specified education expenses incurred by the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependent. (26 U.S.C. § 25A(b).)

 

Institutions MUST do the following:

In 2002, the Internal Revenue Service (IRS) adopted regulations (effective December 31, 2003) requiring eligible educational institutions that enroll any individual for any academic period to:

  • file an informational return (1098-T) with respect to specified individuals; and

  • provide specified individuals a statement containing specified information. (26 C.F.R. § 1.6050S-1(a).)

These requirements apply to any student, regardless of whether the tax payer seeks or intends to seek the Hope Scholarship Credit.

 

Institutions are NOT required to do the following:

Institutions are not required to report this information for an individual who is a nonresident alien unless that individual requests the institution to report the information. (26 C.F.R.§ 1.6050S-1(a)(2).)

The reporting requirements also do not apply for students enrolled solely in noncredit courses. (26 C.F.R. § 1.6050S-1(a)(2)(ii), (b)(5)(ii).)

The courses for which the Hope Scholarship Credit can be claimed must be for course work leading toward a post-secondary degree, certificate, or other recognized post-secondary educational credential. (26 C.F.R.§ 1.6050S-1(a)(2)(ii)(B).)

 

The information the college must report to the IRS on the Form 1098-T includes:

  • name, address and TIN -- which can also be the social security number (SSN) -- of the student;

  • name, address and TIN of anyone claiming the student as a dependent for purposes of specified tax deductions; (If the user is a minor, should we be ALSO collecting their Parent or Guardian's SSN? Or ONLY their P/G?)

  • aggregate amount of payments for qualified tuition and related expenses received by the student during the calendar year;

  • aggregate amount of reimbursements or refunds paid to the student during the calendar year;

  • whether the student is carrying at least half the normal full-time work load for the course of study the student is pursuing;

  • whether the student has completed the first two years of postsecondary education; and the name and employer identification number of the institution.1 (26 CFR § 1.6050S-1(b)(3).



The college must include the following information on the statement

… that it provides to the student:

  • the information the college is required to report to the IRS; and

  • other specified admonishments to the tax payer regarding the tax payer’s obligations and rights. (26 CFR § 1.6050S-1(c).)

Institutions that fail to report or misreport the required information to the IRS can be penalized. (26 C.F.R. § 1.6050S-1(e)(1).)
Institutions can also be penalized for failure to provide affected individuals a correct information statement. (26 C.F.R. § 1.6050S-1(e)(2).)

 

Penalties

Penalties resulting from a failure by the institution to provide a correct TIN can be waived if the failure is “due to reasonable cause.” (26 C.F.R. § 1.6050S-1(e)(3).) An institution can establish reasonable cause if “the failure arose from events beyond the institution’s [...] control, such as failure of the individual to furnish a correct TIN. However the institution [...] must establish that it acted in a responsible manner both before and after the failure.” (26 C.F.R. § 1.6050S-1(e)(3)(i).)

See also, Reasonable Cause Regulations and Requirements for Missing and Incorrect Name/TINs -
Department of the Treasury, Internal Revenue Services, Publication 1586, Rev. June 2012, http://www.irs.gov/pub/irs-pdf/p1586.pdf

The IRS prescribes precisely what an institution must have done to have acted in a responsible manner. (§ 1.6050S-2(e)(3)(ii).) The institution must have requested the TIN of each individual for whom it is required to file a return (1098-T) if it does not already have a record of the individual’s correct TIN. If the institution does not have the TIN then the institution must request the TIN in writing, and must clearly notify the individual that the law requires the individual to furnish a TIN so that it may be included on an information return filed by the institution. Institutions can use IRS form W-9S to request the information, or may create their own process (including an electronic process) for doing so. (26 C.F.R. § 1.6050S-1(e)(3)(iii).) An

individual who fails to furnish a TIN upon request by the institution can be subject to a penalty imposed by the IRS. (26 C.F.R. § 1.6050S-1(e)(4).)

Footnotes
1Colleges should review the IRS regulations for a complete listing of all the information that the college must report to the IRS.
2Colleges should review the IRS regulations for a complete listing of all the information that the college must include on the statement provided to the student


State and Federal Privacy Laws

Collection and Use of Social Security Numbers by Community Colleges

In 2005, Civil Code section 1798.85 was enacted protecting the confidentiality of social security numbers. Persons and entities, including post-secondary educational institutions, could no longer use social security numbers on student identification cards, post social security numbers, require students to transmit his or her social security number over the Internet unless specified security precautions have been taken, or require a student to use his or her social security number to access a web site unless an authentication device is also required to access the web site. (Civ. Code, § 1798.85(a), [partial list].) However, the statute specifically allowed the “collection, use or release of a social security number as required by state or federal law or the use of a social security number for internal verification or administrative purposes.” (Civ. Code, § 1798.85(b).) Thus, Civil Code section 1798.85 does not preclude colleges from collecting social security numbers or providing them to the IRS for the purposes of complying with the requirements of part 26 of the Code of Federal Regulations, section 1.6050S-1 et seq.



FERPA

Generally, the Family Educational Rights and Privacy Act (FERPA) (20 U.S.C. § 1232g; 34 C.F.R. part 99) precludes educational institutions, including colleges, from disclosing personally identifiable information (PII) from students’ education records without consent. Students’ education records are those records that “contain information directly related to a student; and are maintained by the educational agency or institution or by a person acting for such agency or institution.” (34 C.F.R. § 99.3 “Education Records.”)

The reporting requirements of the Hope Scholarship Credit require colleges to disclose to the IRS the student’s SSN/TIN, name, address, enrollment status (part time or full time), and whether the student has completed the first two years of postsecondary education, all of which are PII maintained in the student’s education records within the meaning of FERPA. Generally, colleges must first obtain the consent of the student prior to disclosing those records to a third party. While there are some exceptions to the prior consent rule, none of the exceptions are applicable in the instant matter. Obviously, this means that there is a conflict between two federal laws, one requiring colleges to disclose PII from education records and the other prohibiting disclosure of PII from education records. The Family Policy Compliance Office (FPCO), the entity responsible for enforcement of FERPA, addressed this conflict in 1997. (Tax Legislative Council, Dept. of the Treasury, and Chief Counsel, IRS, letter to Director, FPCO, November 25, 1997, (http://www2.ed.gov/policy/gen/guid/fpco/ferpa/library/hope.html.)

The FPCO concluded that the Tax Relief Act controlled because it was the more specific statute as well as the more recently enacted statute. (Id.at p. 2, (citations omitted).)

Footnote:
3Community colleges were required to comply with Civil Code section 1798.85 by January 1, 2007. (Civ. Code,§ 1798.85(i).)


Education Code

State law, like FERPA, precludes the disclosure of PII from students’ education records without consent, except in very limited circumstances not applicable in the instant matter. (Ed. Code,§ 76210, et seq.) A state law actually conflicts with federal law where it is impossible for a private party to comply with both state and federal requirements, or where state law “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” (Hines v. Davidowitz, (1941) 312 U.S. 52, 67.) Clearly, state statutes prohibiting disclosure of SSNs, etc. from students’ education records directly conflict with federal statutes requiring the disclosure. State law that conflicts with federal law is without effect. (U.S.C.A. art. VI, cl. 2.)

Thus, the IRS regulations supersede state privacy laws which would otherwise prohibit disclosure of specified PII from students’ education records without the student’s consent to the IRS. Colleges may legally provide the IRS with the required information without the student’s consent as necessary to meet the reporting requirements of the Hope Scholarship Credit.

However, FERPA and state law limit the re-disclosure of PII from the student’s education record. These requirements are not preempted or superseded by the IRS regulations. Thus, the IRS is prohibited from re-disclosing the information provided by colleges without the student’s consent (or unless an exception applies). (34 C.F.R. 99.33(a)(1), Ed. Code, § 76243(a)(8)(B) .) Colleges can be sanctioned for improper re-disclosure of PII. Further, in the event the IRS did make an improper disclosure the college would be prohibited from providing the IRS with PII from education records without the student’s consent for at least five years. (20 U.S.C.§ 1232g(b)(4)(B).)

 

Conclusion

Colleges must comply with the reporting provision of IRS regulations 26 C.F.R. § 1.6050S-1 et seq., including obtaining a correct TIN from each student. Colleges that do not obtain correct information from the student can be penalized by the IRS. Colleges that act in a “responsible manner” as defined by the regulations in obtaining the TIN/SSN may be able to have any assessed penalty waived. Colleges that receive a Notice of Proposed Civil Penalty from the IRS should work with their local counsel to file a request to waive the penalty. The IRS has provided comprehensive guidelines that provide information needed to avoid penalties, describes what actions must be taken to request TINs, and explains the requirements for establishing reasonable cause (which can result in the waiver of penalties). (http://www.irs.gov/pub/irs-pdf/p1586.pdf.) If your college has received a Notice of Proposed Civil Penalty you have to answer that notice within 45 days from the notice date (not when it was received, but the date on the notice). It may be possible for colleges to receive an extension of time. A written request should be sent before the expiration of the 45 days to the IRS’ Philadelphia Campus address:

Internal Revenue Service

2970 Market Street 4-E08.141

LIH Unit - Mail Stop E-08.143

Philadelphia, PA 19104

Reasonable cause requests should be sent to the IRS center where you filed your return.(http://www.irs.gov/uac/Where-to-File-Certain-Elections,-Statements,-Returns-and-Other-Documents.)

https://www.irs.gov/pub/irs-pdf/p1586.pdf


The following IRS legal language came from the specific links provided in the Legal Opinion 13-05 above. This has been put here for easy reference.

(a) Information reporting requirement -


(1) In general.

Except as provided in paragraph (a)(2) of this section, any eligible educational institution(as defined in section 25A(f)(2) and the regulations thereunder) (an institution) that enrolls (as determined under paragraph (d)(1) of this section) any individual for any academic period (as defined in the regulations under section 25A), and any person that is engaged in a trade or business of making payments under an insurance arrangement as reimbursements or refunds (or other similar amounts) of qualified tuition and related expenses (as defined in section 25A(f)(1) and the regulations thereunder) (an insurer) must -

(i) File an information return, as described in paragraph (b) of this section, with the Internal Revenue Service (IRS) with respect to each individual described in paragraph (b) of this section; and

(ii) Furnish a statement, as described in paragraph (c) of this section, to each individual described in paragraph (c) of this section.

(2) Exceptions -

(i) No reporting by institution or insurer for nonresident alien individuals.

The information reporting requirements of this section do not apply with respect to any individual who is a nonresident alien (as defined in section 7701(b) and § 301.7701(b)-3 of this chapter) during the calendar year, unless the individual requests the institution or insurer to report. If a nonresident alien individual requests an institution or insurer to report, the institution or insurer must comply with the requirements of this section for the calendar year with respect to which the request is made.

(ii) No reporting by institutions for noncredit courses -

(A) In general. The information reporting requirements of this section do not apply with respect to any course for which no academic credit is offered by the institution.

(B) Academic credit defined. Academic credit means credit offered by an institution for the completion of course work leading toward a post-secondary degree, certificate, or other recognized post-secondary educational credential.

(C) Example. The following example illustrates the rules of this paragraph (a)(2)(ii):

Example.

Student A, a medical doctor, takes a course at University X's medical school. Student A takes the course to fulfill State Y's licensing requirement that medical doctors attend continuing medical education courses each year. Student A is not enrolled in a degree program at University X and takes the medical course through University X's continuing professional education division. University X does not offer credit toward a post-secondary degree on an academic transcript for the completion of the course but gives Student A a certificate of attendance upon completion. Under this paragraph (a)(2)(ii), University X is not subject to the information reporting requirements of section 6050S and this section for the medical education course taken by Student A.

 

(iii) No reporting by institutions for individuals whose qualified tuition and related expenses are waived or are paid with scholarships.

The information reporting requirements of this section do not apply with respect to any individual whose qualified tuition and related expenses are waived in their entirety or are paid entirely with scholarships.

 

 

(iv) No reporting by institutions for individuals whose qualified tuition and related expenses are covered by a formal billing arrangement -

(A)In general. The information reporting requirements of this section do not apply with respect to any individual whose qualified tuition and related expenses are covered by a formal billing arrangement as defined in paragraph (a)(2)(iv)(B) of this section.

(B)Formal billing arrangement defined. A formal billing arrangement means -

(1) An arrangement in which the institution bills only an employer for education furnished by the institution to an individual who is the employer's employee and does not maintain a separate financial account for that individual;

(2) An arrangement in which the institution bills only a governmental entity for education furnished by the institution to an individual and does not maintain a separate financial account for that individual; or

(3) Any other similar arrangement in which the institution bills only an institutional third party for education furnished to an individual and does not maintain a separate financial account for that individual, but only if designated as a formal billing arrangement by the Commissioner in published guidance of general applicability or in guidance directed to participants in specific arrangements.

 

(b) Requirement to file return


(1) In general. Institutions may elect to report either the information described in paragraph (b)(2) of this section, or the information described in paragraph (b)(3) of this section. Once an institution elects to report under either paragraph (b)(2) or (3) of this section, the institution must use the same reporting method for all calendar years in which it is required to file returns, unless permission is granted to change reporting methods. Paragraph (b)(2) of this section requires institutions to report, among other information, the amount of payments received during the calendar year for qualified tuition and related expenses. Institutions must report separately adjustments made during the calendar year that relate to payments received for qualified tuition and related expenses that were reported for a prior calendar year. For purposes of paragraph (b)(2) of this section, an adjustment made to payments received means a reimbursement or refund. Paragraph (b)(3) requires institutions to report, among other information, the amounts billed during the calendar year for qualified tuition and related expenses. Institutions must report separately adjustments made during the calendar year that relate to amounts billed for qualified tuition and related expenses that were reported for a prior calendar year. For purposes of paragraph (b)(3) of this section, an adjustment made to amounts billed means a reduction in charges. Insurers must report the information described in paragraph (b)(4) of this section.

(2) Information reporting requirements for institutions that elect to report payments received for qualified tuition and related expenses -

(i) In general. Except as provided in paragraph (a)(2) of this section, an institution reporting payments received for qualified tuition and related expenses must file an information return with the IRS on Form 1098-T, “Tuition Statement,” with respect to each individual enrolled (as determined in paragraph (d)(1)of this section) for an academic period beginning during the calendar year or during a prior calendar year and for whom a transaction described in paragraphs (b)(2)(ii)(C), (E), (F) or (G) of this section is made during the calendar year. An institution may use a substitute Form 1098-T if the substitute form complies with applicable revenue procedures relating to substitute forms (see§ 601.601(d)(2) of this chapter).

(ii) Information included on return. An institution reporting payments received for qualified tuition and related expenses must include on Form 1098-T -

(A) The name, address, and taxpayer identification number (TIN)(as defined in section 7701(a)(41)) of the institution;

(B) The name, address, and TIN of the individual who is, or has been, enrolled by the institution;

(C) The amount of payments of qualified tuition and related expenses that the institution received from any source with respect to the individual during the calendar year;

(D) An indication by the institution whether any payments received for qualified tuition and related expenses reported for the calendar year relate to an academic period that begins during the first three months of the next calendar year;

(E) The amount of any scholarships or grants for the payment of the individual's costs of attendance that the institution administered and processed during the calendar year;

(F) The amount of any reimbursements or refunds of qualified tuition and related expenses made during the calendar year with respect to the individual that relate to payments of qualified tuition and related expenses that were reported by the institution for a prior calendar year;

(G) The amount of any reductions to the amount of scholarships or grants for the payment of the individual's costs of attendance that were reported by the institution with respect to the individual for a prior calendar year;

(H) A statement or other indication showing whether the individual was enrolled for at least half of the normal full-time work load for the course of study the individual is pursuing for at least one academic period that begins during the calendar year (see section 25A and the regulations thereunder);

(I) A statement or other indication showing whether the individual was enrolled in a program leading to a graduate-level degree, graduate-level certificate, or other recognized graduate-level educational credential; and

(J) Any other information required by Form 1098-T and its instructions.

 

(iii) Reportable amount of payments received for qualified tuition and related expenses during calendar year determined. The amount of payments received for qualified tuition and related expenses with respect to an individual during the calendar year that is reportable on Form 1098-T is determined by netting the amount of payments received (as defined in paragraph (b)(2)(v) of this section) for qualified tuition and related expenses during the calendar year against any reimbursements or refunds (as defined in paragraph (b)(2)(vi) of this section) made during the calendar year that relate to payments received for qualified tuition and related expenses during the same calendar year.

(iv) Separate reporting of reimbursements or refunds of payments of qualified tuition and related expenses that were reported for a prior calendar year. An institution must separately report on Form 1098-T any reimbursements or refunds (as defined in paragraph (b)(2)(vi) of this section) made during the current calendar year that relate to payments of qualified tuition and related expenses that were reported by the institution for a prior calendar year. Such reimbursements or refunds shall not be netted against the payments received for qualified tuition and related expenses during the current calendar year.

(v) Payments received for qualified tuition and related expenses determined. For purposes of determining the amount of payments received for qualified tuition and related expenses during a calendar year, payments received with respect to an individual during the calendar year from any source (except for any scholarship or grant that, by its terms, must be applied to expenses other than qualified tuition and related expenses, such as room and board) are treated as payments of qualified tuition and related expenses up to the total amount billed by the institution for such expenses. For purposes of this section, a payment includes any positive account balance (such as any reimbursement or refund credited to an individual's account) that an institution applies toward current charges.

(vi) Reimbursements or refunds of payments for qualified tuition and related expenses determined. For purposes of determining the amount of reimbursements or refunds made of payments received for qualified tuition and related expenses, any reimbursement or refund made with respect to an individual during a calendar year (except for any refund of a scholarship or grant that, by its terms, was required to be applied to expenses other than qualified tuition and related expenses, such as room and board) is treated as a reimbursement or refund of payments for qualified tuition and related expenses up to the amount of any reduction in charges for such expenses. For purposes of this section, a reimbursement or refund includes amounts that an institution credits to an individual's account, as well as amounts disbursed to, or on behalf of, the individual.

(vii) Examples. The following examples illustrate the rules in this paragraph (b)(2):

Example 1.

(i) In early August 2003, University X bills enrolled Student A $10,000 for qualified tuition and related expenses and $6,000 for room and board for the 2003 Fall semester. In late August 2003, Student A pays $11,000 to University X. In early September 2003, Student A drops to half-time enrollment for the 2003 Fall semester. In late September 2003, University X credits $5,000 to Student A's account, reflecting a $5,000 reduction in charges for qualified tuition and related expenses. In late September 2003, University X applies the $5,000 positive account balance toward current charges.

(ii) Under paragraph (b)(2)(v) of this section, the $11,000 payment is treated as a payment of qualified tuition and related expenses up to the $10,000 billed for qualified tuition and related expenses. Under paragraph (b)(2)(vi) of this section, the $5,000 credited to the student's account is treated as a reimbursement or refund of payments for qualified tuition and related expenses, because the current year charges for qualified tuition and related expenses were reduced by $5,000. Under paragraph (b)(2)(iii) of this section, University X is required to net the $10,000payment received for qualified tuition and related expenses during 2003 against the $5,000 reimbursement or refund of payments received for qualified tuition and related expenses during 2003. Therefore, Institution X is required to report $5,000 of payments received for qualified tuition and related expenses during 2003.

 

Example 2.

(i) The facts are the same as in Example 1, except that Student A pays the full $16,000 in late August 2003. In late September 2003, University X reduces the tuition charges by $5,000 and issues a $5,000 refund to Student A.

(ii) Under paragraph (b)(2)(v) of this section, the $16,000 payment is treated as a payment of qualified tuition and related expenses up to the $10,000 billed for qualified tuition and related expenses. Under paragraph (b)(2)(vi) of this section, the $5,000 refund is treated as reimbursement or refund of payments for qualified tuition and related expenses, because the current year charges for qualified tuition and related expenses were reduced by $5,000. Under paragraph (b)(2)(iii) of this section, University X is required to net the $10,000 payment received for qualified tuition and related expenses during 2003 against the $5,000 reimbursement or refund of payments received for qualified tuition and related expenses during 2003. Therefore, Institution X is required to report $5,000 of payments received for qualified tuition and related expenses during 2003.

 

Example 3.

(i) The facts are the same as in Example 1, except that Student A is enrolled full-time, and, in early September 2003, Student A decides to live at home with her parents. In late September 2003, University X adjusts Student A's account to eliminate room and board charges and issues a $1,000 refund to Student A.

(ii) Under paragraph (b)(2)(v) of this section, the $11,000 payment is treated as a payment of qualified tuition and related expenses up to the $10,000 billed for qualified tuition and related expenses. Under paragraph (b)(2)(vi) of this section, the $1,000 refund is not treated as reimbursement or refund of payments for qualified tuition and related expenses, because there is no reduction in charges for qualified tuition and related expenses. Therefore, under paragraph (b)(2)(iii) of this section, University X is required to report $10,000 of payments received for qualified tuition and related expenses during 2003.

 

Example 4.

(i) In early December 2003, College Y bills enrolled Student B $10,000 for qualified tuition and related expenses and $6,000 for room and board for the 2004 Spring semester. In late December 2003, Student B pays $16,000. In mid-January 2004, after the 2004 Spring semester classes begin, Student B drops to half-time enrollment. In mid-January 2004, College Y credits Student B's account with $5,000, reflecting a $5,000 reduction in charges for qualified tuition and related expenses, but does not issue a refund to Student B. In early August 2004, College Y bills Student B $10,000 for qualified tuition and related expenses and $6,000 for room and board for the 2004 Fall semester. In early September 2004, College Y applies the $5,000 positive account balance toward Student B's $16,000 bill for the 2004 Fall semester. In late September 2004, Student B pays $6,000 towards the charges.

(ii) In the reporting for calendar year 2003, under paragraph (b)(2)(v) of this section, the $16,000payment in December 2003 is treated as a payment of qualified tuition and related expenses up to the $10,000 billed for qualified tuition and related expenses. Under paragraph (b)(2)(iii) of this section, College Y is required to report $10,000 of payments received for qualified tuition and related expenses during 2003. In addition, College Y is required to indicate that the payments reported for 2003 relate to an academic period that begins during the first three months of the next calendar year.

(iii) In the reporting for calendar year 2004, under paragraph (b)(2)(vi) of this section, the $5,000 credited to Student B's account is treated as a reimbursement or refund of qualified tuition and related expenses, because the charges for qualified tuition and related expenses were reduced by $5,000. Under paragraph (b)(2)(iv) of this section, the $5,000 reimbursement or refund of qualified tuition and related expenses must be separately reported on Form 1098-T because it relates to payments of qualified tuition and related expenses reported by College Y for 2003. Under paragraph (b)(2)(v) of this section, the $5,000 positive account balance that is applied toward charges for the 2004 Fall semester is treated as a payment. Therefore, College Y received total payments of $11,000 during 2004 (the $5,000 credit plus the $6,000 payment). Under paragraph (b)(2)(v) of this section, the $11,000 of total payments are treated as a payment of qualified tuition and related expenses up to the $10,000 billed for such expenses. Therefore, for 2004, College Y is required to report $10,000 of payments received for qualified tuition and related expenses during 2004 and a $5,000 refund of payments of qualified tuition and related expenses reported for 2003.

 

(3) Information reporting requirements for institutions that elect to report amounts billed for qualified tuition and related expenses -

(i) In general. Except as provided in paragraph (a)(2) of this section, an institution reporting amounts billed for qualified tuition and related expenses must file an information return on Form 1098-T with respect to each individual enrolled (as determined in paragraph (d)(1) of this section) for an academic period beginning during the calendar year or during a prior calendar year and for whom a transaction described in paragraphs (b)(3)(ii)(C), (E), (F) or (G) of this section is made during the calendar year. An institution may use a substitute Form 1098-T if the substitute form complies with applicable revenue procedures relating to substitute forms (see§ 601.601(d)(2) of this chapter).

(ii) Information included on return. An institution reporting amounts billed for qualified tuition and related expenses must include on Form 1098-T -

(A) The name, address, and taxpayer identification number (TIN)(as defined in section 7701(a)(41)) of the institution;

(B) The name, address, and TIN of the individual who is, or has been, enrolled by the institution;

(C) The amount billed for qualified tuition and related expenses with respect to the individual during the calendar year;

(D) An indication by the institution whether any amounts billed for qualified tuition and related expenses reported for the calendar year relate to an academic period that begins during the first three months of the next calendar year;

(E) The amount of any scholarships or grants for the payment of the individual's costs of attendance that the institution administered and processed during the calendar year;

(F) The amount of any reductions in charges made during the calendar year with respect to the individual that relate to amounts billed for qualified tuition and related expenses that were reported by the institution for a prior calendar year;

(G) The amount of any reductions to the amount of scholarships or grants for the payment of the individual's costs of attendance that were reported by the institution with respect to the individual for a prior calendar year;

(H) A statement or other indication showing whether the individual was enrolled for at least half of the normal full-time work load for the course of study the individual is pursuing for at least one academic period that begins during the calendar year (see section 25A and the regulations thereunder);

(I) A statement or other indication showing whether the individual was enrolled in a program leading to a graduate-level degree, graduate-level certificate, or other recognized graduate-level educational credential; and

(J) Any other information required by Form 1098-T and its instructions.

(iii) Reportable amounts billed for qualified tuition and related expenses during calendar year determined. The amount billed for qualified tuition and related expenses with respect to an individual during the calendar year that is reportable on Form 1098-T is determined by netting the amounts billed for qualified tuition and related expenses during the calendar year against any reductions in charges forqualified tuition and related expenses made during the calendar year that relate to amounts billed for qualified tuition and related expenses during the same calendar year.

(iv) Separate reporting of reductions made to amounts billed for qualified tuition and related expenses that were reported for a prior calendar year. An institution must separately report on Form 1098-T any reductions in charges made during the current calendar year that relate to amounts billed for qualified tuition and related expenses that were reported by the institution for a prior calendar year. Such reductions shall not be netted against amounts billed for qualified tuition and related expenses during the current calendar year.

 

(v) Examples. The following examples illustrate the rules in this paragraph (b)(3):

Example 1.

(i) In early August 2003, University X bills enrolled Student A $10,000 for qualified tuition and related expenses and $6,000 for room and board for the 2003 Fall semester. In late August 2003, Student A pays $11,000 to University X. In early September 2003, Student A drops to half-time enrollment for the 2003 Fall semester. In late September 2003, University X adjusts Student A's account and reduces the charges for qualified tuition and related expenses by $5,000 to reflect half-time enrollment. In late September 2003, University X applies the $5,000 account balance toward current charges.

(ii) Under paragraph (b)(3)(iii) of this section, University X is required to net the $10,000 amountof qualified tuition and related expenses billed during 2003 against the $5,000 reduction in charges for qualified tuition and related expenses during 2003. Therefore, Institution X is required to report $5,000 in amounts billed for qualified tuition and related expenses during 2003.

Example 2.

(i) The facts are the same as in Example 1, except that, in addition, in early December 2003, College X bills Student A $10,000 for qualified tuition and related expenses and $6,000 for room and board for the 2004 Spring semester. In early January 2004, Student A pays $16,000. In mid-January 2004, after the 2004 Spring semester classes begin, Student A drops to half-time enrollment. In mid-January 2004, College X credits $5,000 to Student A's account, reflecting a $5,000 reduction in charges for qualified tuition and related expenses, but does not issue a refund check to Student A. In early August 2004, College X bills Student A $10,000 for qualified tuition and related expenses and $6,000 for room and board for the 2004 Fall semester. In early September 2004, College X applies the $5,000 positive account balance toward Student A's $16,000 bill for the 2004 Fall semester. In late September 2004, Student A pays $6,000 toward the charges.

(ii) In the reporting for calendar year 2003, under paragraph (b)(3)(iii) of this section, College X is required to report $15,000 amounts billed for qualified tuition and related expenses during 2003 ($5,000 for the 2003 Fall semester and $10,000 for the 2004 Spring semester). In addition, College X is required to indicate that some of the amounts billed for qualified tuition and related expenses reported for 2003 relate to an academic period that begins during the first three months of the next calendar year.

(iii) In the reporting for calendar year 2004, under paragraph (b)(3)(iv) of this section, the $5,000reduction in charges for qualified tuition and related expenses must be separately reported on Form 1098-T because it relates to amounts billed for qualified tuition and related expenses that were reported by College X for 2003. Under paragraph (b)(3)(iii) of this section, College X is required to report $10,000 in amounts billed for qualified tuition and related expenses during 2004.

 

(4) Requirements for insurers

 

(i) In general. Except as otherwise provided in this section, an insurer must file an information return for each individual with respect to whom reimbursements or refunds of qualified tuition and related expenses are made during the calendar year on Form 1098-T. An insurer may use a substitute Form 1098-T if the substitute form complies with applicable revenue procedures relating to substitute forms (see§ 601.601(d)(2) of this chapter).

(ii) Information included on return. An insurer must include on Form 1098-T -

(A) The name, address, and taxpayer identification number (TIN) (as defined in section 7701(a)(41)) of the insurer;

(B) The name, address, and TIN of the individual with respect to whom reimbursements or refunds ofqualified tuition and related expenses were made;

(C) The aggregate amount of reimbursements or refunds of qualified tuition and related expenses that the insurer made with respect to the individual during the calendar year; and

(D) Any other information required by Form 1098-T and its instructions.

 

(5) Time and place for filing return -

(i) In general. Except as provided in paragraphs (b)(5)(ii) and (iii) of this section, Form 1098-T must be filed on or before February 28 (March 31 if filed electronically) of the year following the calendar year in which payments were received, or amounts were billed, for qualified tuition or related expenses, or reimbursements, refunds, or reductions of such amounts were made. An institution or insurer must file Form 1098-T with the IRS according to the instructions to Form 1098-T.

(ii) Return for nonresident alien individual. In general, an institution or insurer is not required to file a return on behalf of a nonresident alien individual. However, if a nonresident alien individual requests an institution or insurer to report, the institution or insurer must file a return described in paragraph (b) of this section with the IRS on or before the date prescribed in paragraph (b)(5)(i) of this section, or on or before the thirtieth day after the request, whichever is later.

(iii) Extensions of time. The IRS may grant an institution or insurer an extension of time to file returnsrequired in this section upon a showing of good cause. See General Instructions for Forms 1099 series, 1098 series, 5498 series, and W-2G, “Certain Gambling Winnings,” and applicable revenue procedures forrules relating to extensions of time to file (see§ 601.601(d)(2) of this chapter).

(6) Use of magnetic media. See section 6011(e) and § 301.6011-2 of this chapter for rules relating to the requirement to file Forms 1098-T on magnetic media.

 

(c) Requirement to furnish statement

 

(1) In general. An institution or insurer must furnish a statement to each individual for whom it is required to file a Form 1098-T. The statement must include -

(i) The information required under paragraph (b) of this section. An IRS truncated taxpayer identifying number (TTIN) may be used as the TIN of the individual in lieu of the identifying number appearing on the information return filed with the Internal Revenue Service. For provisions relating to the use of TTINs, see § 301.6109-4 of this chapter (Procedure and Administration Regulations);

(ii) A legend that identifies the statement as important tax information that is being furnished to the IRS;

(iii) Instructions that -

(A)State that the statement reports either total payments received by the institution for qualified tuition and related expenses during the calendar year, or total amounts billed by the institution for qualified tuition and related expenses during the calendar year, or the total reimbursements or refunds made by the insurer;

(B)State that, under section 25A and the regulations thereunder, the taxpayer may claim an education tax credit only with respect to qualified tuition and related expenses actually paid during the calendar year; and that the taxpayer may not be able to claim an education tax credit with respect to the entire amount of payments received, or amounts billed, for qualified tuition and related expenses reported for the calendar year;

(C)State that the amount of any scholarships or grants reported for the calendar year and other similar amounts not reported (because they are not administered and processed by the institution) may reduce the amount of any allowable education tax credit for the taxable year;

(D)State that the amount of any reimbursements or refunds of payments received, or reductions in charges, for qualified tuition and related expenses, or any reductions to the amount of scholarships or grants, reported by the institution with respect to the individual for a prior calendar year may affect the amount of any allowable education tax credit for the prior calendar year (and may result in an increase in tax liability for the year of the refund);

(E)State that the amount of any reimbursements or refunds of qualified tuition and related expenses reported by an insurer may reduce the amount of an allowable education tax credit for a taxable year(and may result in an increase in tax liability for the year of the refund);

(F)State that the taxpayer should refer to relevant IRS forms and publications, and should not refer to the institution or the insurer, for explanations relating to the eligibility requirements for, and calculation of, any allowable education tax credit; and

(G) Include the name, address, and phone number of the information contact of the institution or insurer that filed the Form 1098-T.

(2) Time and manner for furnishing statement -

(i) In general. Except as provided in paragraphs (c)(2)(ii) and (iii) of this section, an institution or insurer must furnish the statement described in paragraph (c)(1) of this section to each individual for whom it is required to file a return, on or before January 31 of the year following the calendar year in which payments were received, or amounts were billed, for qualified tuition and related expenses, or reimbursements, refunds, or reductions of such amounts were made. If mailed, the statement must be sent to the individual's permanent address, or the individual's temporary address if the institution or insurer does not know the individual's permanent address. If furnished electronically, the statement must be furnished in accordance with the applicable regulations.

(ii) Statement to nonresident alien individual. If an information return is filed for a nonresident alien individual, the institution or insurer must furnish a statement described in paragraph (c)(1) of this section to the individual in the manner prescribed in paragraph (c)(2)(i) of this section. The statement must be furnished on or before the later of the date prescribed in paragraph (c)(2)(i) of this section or the thirtieth day after the nonresident alien's request to report.

(iii) Extensions of time. The IRS may grant an institution or insurer an extension of time to furnish the statements required in this section upon a showing of good cause. See General Instructions for Forms 1099 series, 1098 series, 5498 series, and W-2G, “Certain Gambling Winnings,” and applicable revenue procedures for rules relating to extensions of time to furnish statements (see§ 601.601(d)(2) of this chapter).

(3) Copy of Form 1098-T. An institution or insurer may satisfy the requirement of this paragraph (c) by furnishing either a copy of Form 1098-T and its instructions or another document that contains all of the information filed with the IRS and the information required by paragraph (c)(1) of this section if the document complies with applicable revenue procedures relating to substitute statements (see§ 601.601(d)(2) of this chapter).

(d) Special rules

(1) Enrollment determined. An institution may determine its enrollment for each academic period under its own rules and policies for determining enrollment or as of any of the following dates -

(i) 30 days after the first day of the academic period;

(ii) A date during the academic period on which enrollment data must be collected for purposes of the Integrated Post Secondary Education Data System administered by the Department of Education; or

(iii) A date during the academic period on which the institution must report enrollment data to the State, the institution's governing body, or some other external governing body.

(2) Payments of qualified tuition and related expenses received or collected by one or more persons -

(i) In general. Except as otherwise provided in paragraph (d)(2)(ii) of this section, if a person collects or receives payments of qualified tuition and related expenses on behalf of another person (e.g., an institution), the person collecting or receiving payments must satisfy the requirements of paragraphs (b)and (c) of this section. In this case, those requirements do not apply to the transfer of the payments to the institution.

(ii) Exception. If the person collecting or receiving payments of qualified tuition and related expenses on behalf of another person (e.g., an institution) does not possess the information needed to comply with the requirements of paragraphs (b) and (c) of this section, the other person must satisfy those requirements.

(3 )Governmental units. An institution or insurer that is a governmental unit, or an agency or instrumentality of a governmental unit, is subject to the requirements of paragraphs (b) and (c) of this section and an appropriately designated officer or employee of the governmental entity must satisfy those requirements.

 

(e) Penalty provisions

 

(1) Failure to file correct returns. The section 6721 penalty may apply to an institution or insurer that fails to file information returns required by section 6050S and this section on or before the required filing date; that fails to include all of the required information on the return; or that includes incorrect information on the return. See section 6721, and the regulations thereunder, for rules relating to penalties for failure to file correct returns. See section 6724, and the regulations thereunder, for rules relating to waivers of penalties for certain failures due to reasonable cause.

(2) Failure to furnish correct information statements. The section 6722 penalty may apply to an institution or insurer that fails to furnish statements required by section 6050S and this section on or before the prescribed date; that fails to include all the required information on the statement; or that includes incorrect information on the statement. See section 6722, and the regulations thereunder, for rules relating to penalties for failure to furnish correct statements. See section 6724, and the regulations thereunder, for rules relating to waivers of penalties for certain failures due to reasonable cause.

(3) Waiver of penalties for failures to include a correct TIN -

(i)In general. In the case of a failure to include a correct TIN on Form 1098-T or a related information statement, penalties may be waived if the failure is due to reasonable cause. Reasonable cause may be established if the failure arose from events beyond the institution's or insurer's control, such as a failure of the individual to furnish a correct TIN. However, the institution or insurer must establish that it acted in a responsible manner both before and after the failure.

(ii) Acting in a responsible manner. An institution or insurer must request the TIN of each individual for whom it is required to file a return if it does not already have a record of the individual's correct TIN. If the institution or insurer does not have a record of the individual's correct TIN, then it must solicit the TIN in the manner described in paragraph (e)(3)(iii) of this section on or before December 31 of eachyear during which it receives payments, or bills amounts, for qualified tuition and related expenses or makes reimbursements, refunds, or reductions of such amounts with respect to the individual. If an individual refuses to provide his or her TIN upon request, the institution or insurer must file the return and furnish the statement required by this section without the individual's TIN, but with all other required information. The specific solicitation requirements of paragraph (e)(3)(iii) of this section apply in lieu of the solicitation requirements of § 301.6724-1(e) and (f) of this chapter for the purpose of determining whether an institution or insurer acted in a responsible manner in attempting to obtain a correct TIN. An institution or insurer that complies with the requirements of this paragraph (e)(3) will be considered to have acted in a responsible manner within the meaning of § 301.6724-1(d) of this chapter with respect to any failure to include the correct TIN of an individual on a return or statement required by section 6050S and this section.

(iii) Manner of soliciting TIN. An institution or insurer must request the individual's TIN in writing and must clearly notify the individual that the law requires the individual to furnish a TIN so that it may be included on an information return filed by the institution or insurer. A request for a TIN made on Form W-9S, “Request for Student's or Borrower's Taxpayer Identification Number and Certification,” satisfies the requirements of this paragraph (e)(3)(iii). An institution or insurer may establish a system for individuals to submit Forms W-9S electronically as described in applicable forms and instructions. An institution or insurer may also develop a separate form to request the individual's TIN or incorporate the request into other forms customarily used by the institution or insurer, such as admission or enrollment forms or financial aid applications.

(4) Failure to furnish TIN. The section 6723 penalty may apply to any individual who is required (but fails) to furnish his or her TIN to an institution or insurer. See section 6723, and the regulations thereunder, for rules relating to the penalty for failure to furnish a TIN.



(f) Effective/applicability date.

 

The rules in this section apply to information returns required to be filed, and information statements required to be furnished, after December 31, 2003. Paragraph (c)(1)(i) applies topayee statements due after December 31, 2014. For payee statements due before January 1, 2015, § 1.6050S-1 (as contained in 26 CFR part 1, revised April 2013) shall apply.

[T.D. 9029, 67 FR 77682, Dec. 19, 2002; 68 FR 6350, Feb. 7, 2003; T.D. 9675, 79 FR 41131, July 15, 2014]


FERPA Example Information

Reference: https://www2.ed.gov/policy/gen/guid/fpco/ferpa/library/hunter.html

 

Below is an excerpt from a letter sent from the USDOE to a college in NY that disclosed a student's grades by using their SSN (last 4). This is inconsistent with the laws of FERPA which is stated in the letter. However, other interesting information was also provided (see below).

 

This Office advised you of the allegation by letter dated August 21, 2000, and you responded on behalf of the College by letter dated September 25, 2000. You state in your letter that many College professors do post grades by the last four digits of a student's social security number. You state that "no student names are listed" and that this "enables students to easily identify their own grades, yet remain unable to identify any other student's identities." You also state that the College does "not consider this practice to be in violation of FERPA or any other applicable laws."

 

FERPA protects privacy interests of parents in their children's "education records," and generally prohibits the disclosure of personally identifiable information from education records without the consent of the parent. The term "education records" is broadly defined as all records, files, documents and other materials which: contain information directly related to a student; and are maintained by the educational agency or institution or by a person acting for such agency or institution.

20 U.S.C. § 1232g(a)(4)(A); 34 CFR § 99.3 "Education records." When a student reaches the age of 18 or attends an institution of postsecondary education, the student is considered an "eligible student" under FERPA and all of the rights afforded by FERPA transfer from the parents to the student.

 

Under FERPA an eligible student must provide his or her prior written consent before an educational agency or institution discloses personally identifiable information from his or her education records. 20 U.S.C. § 1232g(b); 34 CFR § 99.30. Section 99.3 of the regulations defines the "Personally identifiable information" as information that includes but is not limited to:

  1. the student's name;

  2. the name of the student's parent or other family member;

  3. the address of the student or the student's family;

  4. a personal identifier, such as the student's social security number or student number;

  5. a list of personal characteristics that would make the student's identity easily traceable; or

  6. other information that would make the student's identity easily traceable.

34 CFR § 99.3 "Personally identifiable information." (Emphasis added.) A student's social security number is, by definition, "personally identifiable information" under FERPA, and may not be disclosed without consent in any form.

 

FERPA provides that educational agencies and institutions may not disclose personally identifiable, non-directory information from education records unless a parent or eligible student has provided a signed and dated written consent in accordance with the requirements of § 99.30 of the FERPA regulations. While there are certain exceptions to this general prohibition, none permit an educational agency or institution to publicly disclose personally identifiable information, including the student's grades and portions of the student's social security number, from the education records of students.

In this case, the Student's grades were publicly disclosed along with the last four digits of his social security number absent his consent when they were posted on a web page. Because a social security number, or portions thereof, are by definition "personally identifiable information" under FERPA, this Office finds that the College violated the Student's rights under FERPA as alleged. The Student will be advised of this finding by copy of this letter.

We note that FERPA does not prevent an educational agency or institution from posting the grades of students without written consent when it is not done in a personally identifiable manner. Thus, while FERPA precludes a school from posting grades by social security numbers, student ID numbers, or by names because these types of information are personally identifiable or easily traceable to the students, nothing in FERPA would preclude a school from assigning individual numbers to students for the purpose of posting grades as long as those numbers are known only to the student and the school officials who assigned them.