Seven Best Practices as You Navigate 1098-T Files

Nelnet and the TAB Service Company (TAB) have been partners since 2016. TAB helps institutions in higher education with 1098-T processing. They provide an outsourced solution for institutions to deliver 1098-T’s to students while complying with federal government reporting regulations. 

Meg Lambert, TAB vice president, and Matt Lambert, TAB director of business development, have been successfully processing 1098-T files for roughly 16 years. We asked them to share their expertise on best practices to help institutions as they navigate the 1098-T files. 

Seven best practices for 1098-Ts: 

1. Preparation 
2. Testing 
3. January readiness 
4. Student resolution process 
5. IRS submission process 
6. Common 1098-T errors 
7. Clarify payments 

Good preparation saves time. Here are some key things to consider as you get started on your 1098-T process: 

• Keeping your 1098-T software up to date is imperative as it allows all actions that need to take place to run more efficiently and smoothly.  
• Have a solid process in place for soliciting each student’s Taxpayer Identification Number (TIN). TIN Solicitation has become one of the most important components of the 1098-T life cycle due to potential financial penalties levied by the IRS. It is recommended that institutions have a solicitation process in place so that the TIN solicitation box can be checked for all students that are receiving a 1098-T form. This should help decrease any possible exposure to IRS fines for missing/incorrect TIN penalties.  

• A TIN can be a social security number (SSN) or an Individual Taxpayer Identification Number (ITIN), issued by the IRS. 
• Institutions can obtain a student’s TIN by getting a copy of their Social Security card, requesting they fill out an IRS W-9 form, or an IRS W-8BEN form for foreign students. 
• Obtaining electronic consent from your students allows your institution to deliver 1098-T’s electronically to the Internal Revenue Service (IRS), which saves time and money.  
• If using a third party vendor, communicate any changes to your institution’s expected volume or process changes.  
• Staying informed on any IRS updates to 1098-T instructions is pivotal. 

For institutions using a third party vendor, it is important to test producing a 1098-T file before the actual file is needed. After creating a file, test submitting it to the vendor. Finally, check the test results with your vendor and collaborate with them on how the process went. What can be done next time to ensure an even better process?   

To avoid any 1098-T issues, test the entire process before January.  

Produce live 1098-T files for your third party vendor to ensure they can be submitted on their appropriate due date. If your institution is not outsourcing services, ensure that you have a printing and mailing process in place and ready to go. Finally, performing quality control of 1098-T data before releasing and mailing to your students to ensure that every step was completed and that nothing was over looked.  

Provide a clear solution process for students to use so that questions related to their 1098-T’s and be easily resolved. Designating personnel to answer student calls or using your vendor’s call center services, allows your students to get answers in a timely, systematic matter. Having a method in place for correcting or issuing new 1098-Ts, if needed, will be important if further actions are required.

If your institution uses a vendor to process 1098-Ts, double check when they will transmit the 1098-T files to the IRS. For institutions not using a vendor, ensure your account with the IRS Fire site is up–to–date and accessible for data submission.  

Some common roadblocks that your institution is going to want to steer clear of when processing 1098-T files are:  

• Reporting loans in box 5. 
• Only reporting tuition paid out of pocket in box 1 instead of payments received from all sources. 
• Failing to check box 7 for payments received in current year for classes taken in the first term of the following year. 

• Qualified payments are tuition, fees, and course materials required for a student to be enrolled at or attend an eligible institution.  
• Not qualified payments are amounts paid to cover a course or other education involving sports, games, or hobbies. Unless the course or other education is part of the student’s degree program or is taken to acquire or improve job skills, then it is approved. Charges and fees for room, board, insurance, medical expenses (including student health fees), transportation, and similar personal, living, or family expenses are all not qualified.  

1098-T reporting does not have to be a labor-intensive process if you plan ahead. Don’t have the resources to carry out in-house processing? Explore how using the TSC1098T platform can make all the difference. The Nelnet Campus Commerce and TAB partnership was created to streamline 1098-T files and enhance the customer experience for this often very cumbersome and time intensive task. 

Want to learn more? View on-demand, Streamlining the 1098-T Process.