Common 1098-T Filing Mistakes Educational Institutions Make and How to Avoid Them

Universities are legally obligated to issue IRS Form 1098-T to enrolled students who have made financial transactions related to tuition and education during the year. These transactions include payments received for qualified tuition and fees and scholarships and grants awarded to students. 

The 1098-T form is essential because it helps students (or their parents) claim education-related tax credits, such as the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). These credits can help reduce their federal tax bills or increase refunds.  

However, many universities, especially those managing large student populations or decentralized financial systems, face recurring compliance issues when generating and filing 1098-T forms. Administrative mistakes in a competitive higher education environment can negatively impact student satisfaction and public perception.  

This blog outlines common 1098-T filing mistakes your university might make. We have also provided best practices to help you avoid these filing mistakes.

 

Common 1098-T Filing Mistakes

 

1. Failing to Report All Qualified Tuition-Related Expenses    

One of the most common and costly mistakes institutions make when filing Form 1098-T is not including all the qualified tuition and related expenses (QTRE) payments that should be reported under IRS rules. This often happens when payments that qualify are accidentally excluded due to a misunderstanding of what counts.

Qualified expenses include tuition, mandatory fees, and required course materials. It does not cover room, board, or recreational courses unless they contribute to a degree or career advancement.

 

2. Underreporting Scholarships & Grants  

Underreporting scholarships or grants can lead to inaccurate taxable income calculations for students. Sometimes universities underreport scholarships and grants on Form 1098-T, which can create serious compliance and tax issues.

When the amount of scholarships or grants reported in Box 5 is too low, the student’s taxable income can be miscalculated, leading to incorrectly claiming more education tax credits than they are entitled to. The institution could also face compliance issues.

 

3. Inaccurate or Incomplete Student Information  

Mistakes in student names, addresses, or Taxpayer Identification Numbers (TINs) are among the most common errors in 1098-T filing. When a student’s information does not match IRS records, the filing may be rejected or trigger penalties, jeopardizing their eligibility for education-related tax credits.  

Even minor discrepancies can cause significant disruptions for the institution and the student. Repeated errors may also result in the institution coming under further IRS scrutiny.  

 

4. Missing the IRS and Student Filing Deadlines  

The timely submission of Form 1098-T is not just a compliance requirement. It’s an important step to protect your university from IRS penalties and maintain student trust.  

The IRS requires copies of Form 1098-T to be sent to students by January 31 and filed with the IRS by the end of February for paper filings and March 31 for e-filings. Missing deadlines could result in IRS penalties.  

 

5. Sending Forms to the Wrong Recipient  

It is crucial to deliver Form 1098-T to the correct recipient. Students require the tax information in this form to file their tax returns. However, many institutions face issues when forms are sent to outdated mailing addresses or incorrect email accounts.   

If students don’t receive their 1098-T forms promptly, they may miss deadlines to claim valuable education tax credits, leading to even more compliance issues.   

 

6. Failing to Apply IRS Exceptions Properly

Not all students require Form 1098-T. The IRS outlines specific exceptions. Some students- those whose tuition is fully covered by scholarships, nonresident aliens (unless requested), or those billed through employers/government- do not require a 1098-T.  

Misapplying these rules and reporting for exempt students may result in unnecessary IRS filings that complicate records and raise audit flags.  

 

Best Practices to Avoid 1098-T Filing Errors  

Here are a few best practices to avoid 1098-T filing errors.  

 

Understand Reporting Variations  

Reporting practices can vary among institutions due to differences in systems and interpretations of IRS guidelines. Review your institution’s internal criteria for categorizing charges, and ensure your reporting aligns with IRS definitions.  

 

Coordinate Across Departments   

Coordinate closely with the financial aid, bursar, and registrar offices to ensure seamless communication. This coordinated effort helps track tuition, scholarships, waivers, and payments accurately and ensures the data is captured and accurately reflected in your 1098-T forms.  

 

Implement TIN Checking Process  

Start collecting and verifying TINs (such as SSNs or ITINs) early in the academic year, at the time of enrollment or registration. Use data verification tools such as Tax1099 and collaborate with registrar and financial aid teams to ensure student records are complete and match government databases.   

 

Regularly Train Staff  

Regularly train staff on the IRS definitions of “qualified payments” and “reportable aid,” as well as IRS exception rules, to prevent misreporting due to misunderstanding or policy misinterpretation. Always cross-check data between the financial aid, bursar, and registrar offices before submission. 

   

Offer Secure Electronic Delivery  

Provide online access to 1098-T forms through student portals and ensure students have consented to electronic delivery per IRS guidelines. For those who opt into electronic delivery, make 1098-T forms accessible via a secure online portal and ensure timely and accurate mailing to their current addresses.  

 

How Tax1099 Supports Accurate & Compliant 1098-T Filing for Universities

Tax1099, a trusted IRS-approved e-file provider, offers features that make accurate 1098-T filing easy and efficient for universities.

• Automated Data Checks: Tax1099 automatically flags missing or misaligned values for Box 1 (payments received) and Box 5 (scholarships and grants). 

• Real-Time TIN Matching & Validation: Our platform verifies student Taxpayer Identification Numbers (TINs) in bulk before filing.   

• Bulk Import & API Integration: We allow your institution to import data in bulk via Excel or integrate with your ERP system via API.
   
• Role-Based Access & Approval Workflows: Tax1099 lets multiple departments collaborate securely with user permissions, audit trails, and review/approval flows.  

 

To learn more about Tax1099 and how we can help with Form 1098-T processing, write to us at [email protected] today. We can help you file 1098-T accurately and in a timely manner.