2021 HEERF student grants subject to Form 1098-T reporting

| 6/17/2021
Tax News Highlights Featured Image

According to guidance from the IRS that was updated as of May 18, higher education institutions now might have a requirement under IRC Section 6050S to report Higher Education Emergency Relief Fund (HEERF) grants awarded to students. This is a change from IRS guidance applicable to 2020, which stated that HEERF grants were not subject to Form 1098-T, “Tuition Statement,” reporting.

Background

Eligible educational institutions (generally including colleges, universities, vocational schools, or other postsecondary educational institutions) must provide students a Form 1098-T to report payments received for qualified tuition and related expenses (QTRE), such as books, supplies, and equipment needed for a course of study. QTRE payments are reported in Box 1 of Form 1098-T. Scholarships or grants administered and processed by the educational institution are reported in Box 5 of Form 1098-T.

The HEERF was established as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which was enacted by Congress on March 27, 2020. Higher education institutions could use certain HEERF funds to support students with financial needs related to the COVID-19 pandemic. Additional HEERF funds subsequently were made available through the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (CRRSAA), signed into law on Dec. 27, 2020 (HEERF II), and through the American Rescue Plan Act of 2021 (ARP), signed into law on March 11, 2021 (HEERF III).

Sign up to receive the latest tax insights as well as tax regulatory and administrative updates. 

Questions about the taxability and reporting of HEERF grants, including Form 1098-T reporting, arose during 2020. The IRS responded with a series of FAQs, which indicated that HEERF grants were qualified disaster relief payments under IRC Section 139 and were not included in students’ gross income. Additionally, in an FAQ dated Dec. 14, 2020, the IRS stated that, because reporting grants on Forms 1098-T could result in the issuance of notices of underreporting for students and could confuse students, HEERF grants would not be required to be reported on 2020 Form 1098-T.

The most recent FAQs, however, indicate that higher education institutions must report total QTRE, including QTRE paid with HEERF grant funds, in Box 1 of Form 1098-T. Higher education institutions do not need to separately identify the portion of QTRE paid with HEERF grants anywhere on Form 1098-T, and they do not need to report the grants themselves in Box 5 of Form 1098-T. This is the case regardless of whether the higher education institution paid the emergency financial aid grants to a student, who then used grant money to pay for QTRE, or applied grant money directly to a QTRE on a student’s account.

Form 1098-T and related reporting might continue to evolve as higher education institutions process HEERF funding, so higher education institutions should continue to monitor relevant IRS guidance, including FAQs or other guidance released on this matter.

 

Related topics

Stay up to speed on regulatory and legislative tax changes with timely updates from Crowe.

Our leaders offer insights into tax changes the Biden administration might pursue.

Stay up to speed on regulatory and legislative tax changes with timely updates from Crowe.

Our leaders offer insights into tax changes the Biden administration might pursue.

Contact Us

Our experienced tax professionals can help you tackle your most pressing tax challenges. Contact the Crowe tax team today.
Diane Brown
Diane Brown
Principal
Rochelle Hodes
Rochelle Hodes
Principal, Washington National Tax
Janice Smith
Janice Smith
Managing Director