In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) which provided funds to institutions of higher education to support students and financial needs during the pandemic. On December 14, 2020, the Internal Revenue Service released an FAQ to clarify questions around reporting for tax purposes.
Dean Dorton has received numerous questions around the reporting of emergency aid grants on Form 1098-T. FAQ Question 3 addresses and resolves most of the questions surrounding this area:
Q3: Do higher education institutions have any information reporting requirements under section 6050S for emergency financial aid grants awarded to students under section 3504, 18004, or 18008 of the CARES Act? (added December 14, 2020)
A3: No. The emergency financial aid grants are qualified disaster relief payments, as described in A1 above, and are not included in students’ gross income. As noted in A2 above, students may not claim deductions or credits for these amounts. The reporting of these grants to the IRS on Forms 1098-T could result in the issuance of underreporter notices (Letters CP2000) to students and furnishing such Forms 1098-T to students could cause confusion. Thus, the IRS will not require that these grants be reported pursuant to section 6050S of the Internal Revenue Code on Form 1098-T.
For the whole FAQ, visit the link below:
Allison Carter, CPA
Tax Associate Director
alcarter@deandorton.com • 859.425.7645
Megan Crane, CPA
Assurance Manager
mcrane@deandorton.com • 859.425.7643
