For U.S. universities and colleges, the IRS Form 1098-T is not only a standard filing requirement. It is also a high-stakes financial report that is an integral part of tax reporting, student communication, and institutional compliance.
This article provides the key information that every finance leader, university CFO, and compliance officer must understand. This information is regarding 1098-T in 2025, without unnecessary frills. If your institution relies on you for reporting or IRS compliance, this is what you need to know.
What is IRS Form 1098-T?
IRS Form 1098-T, formally known as the “Tuition Statement,” is provided by qualifying educational institutions. Which is to report qualified tuition and related expenses paid by students. The IRS relies on this form to establish a student’s eligibility for education-related tax credits, including the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).
Universities have to submit this form to the IRS and to the student by January 31 of every year, for the previous calendar year’s transactions.
Importance of 1098-T
For institutions, the timeliness and accuracy of the 1098-T form is more than a normal duty, it’s an essential duty. Incorrect or delayed filings may have serious ramifications, including up to $310 in IRS penalties per faulty form in 2025. Errors not only make it confusing for students during tax time but also put institutions at risk of damage to their reputations with families and stakeholders alike.
Moreover, the administrative cost of processing corrections and possible audits can lead to extra time and cost of operations. In the present regulatory environment, with the IRS increasing its watchfulness, such risks are quite real. Several universities around the country have already had to pay six-figure penalties for submitting erroneous or incomplete 1098-T reports.
Who Needs to File It?
Any qualifying educational institution that makes payments for qualified tuition and related expenses must file Form 1098-T for each student enrolled. This general requirement applies not only to public and private colleges and universities but also to community colleges and some vocational or post-secondary institutions. Even if scholarships or grants entirely pay the student’s tuition, the requirement generally remains.
As long as the student was attending and tuition payments were made or considered made, the school must typically provide a 1098-T. This is to ensure that students and the IRS have accurate records for education-related tax benefits.
The Information Included in the 1098-T
The institution must complete several IRS-defined fields in Form 1098-T using accurate, up-to-date data sourced from multiple internal systems. Each data point plays a critical role in tax reporting and student eligibility for education-related credits.
First, fundamental identification data like the student’s legal name, Social Security Number (SSN), and address need to be accurate. Any error or discrepancy in this initial data can cause a delay in processing or trigger warning flags with the IRS. The institution then has to enter its information, such as the school’s official name, address, and Employer Identification Number (EIN). These fields relate the filing to the correct organization and ensure that compliance tracking will be accurate.
Box 1: Qualified Tuition and Related Expenses Payments
Most highly scrutinized is Box 1, which reports payments made during the calendar year for qualified tuition and related expenses. Students must access this amount from their accounts with accuracy, as it plays a direct role in their eligibility for the American Opportunity or Lifetime Learning Credits.
Box 5: Scholarships or Grants
Box 5 indicates the total grants or scholarships that were credited to the student’s account. It is important that this figure includes all financial aid that is eligible, as it can lower the amount of tuition that is eligible for tax credits.
Box 7: Payments for Future Academic Periods
In Box 7, institutions mark whether any of the payments reported were made for a future academic term, like spring term tuition in December. This box influences how the IRS and students read the payment timing.
Box 8: Half-Time Enrollment Status
Box 8 verifies whether the student is enrolled at least half-time, a status that can affect credit eligibility. Institutions must maintain current enrollment records and the corresponding reporting year.
All of these fields must be completed correctly. Otherwise, someone might need to correct, reissue the form, or, in certain situations, the form may trigger an audit request from the IRS, causing unnecessary hassle for both the institution and the student.
Mistakes You Should Avoid
Most compliance issues stem from one of the following:
- Disconnected systems: Student billing, registrar, and financial aid platforms often don’t communicate well, causing inconsistencies.
- Manual reconciliation: Without automation, data entry errors and delays increase significantly.
- Inadequate audit trails: When a university can’t defend its filings, audits become more time-consuming and risky.
These challenges are compounded when finance teams are stretched thin during peak filing season, which typically hits between December and January.
What’s Changing in 2025?
Several factors are making 1098-T compliance even more urgent in 2025. First, the IRS is ramping up enforcement, leveraging enhanced analytics and automation to identify discrepancies more effectively. Additionally, penalty thresholds have increased, with fines in some cases doubling for incorrect or untimely submissions.
On top of that, student financial data is becoming increasingly complex, particularly with flexible payment plans, mid-year scholarships, and hybrid learning programs that influence billing cycles. As a result, doing the bare minimum is no longer enough to ensure compliance. In today’s environment, institutions must adapt to these changes to avoid significant financial and reputational risks.
The most efficient and penalty-free institutions follow a common playbook:
- Automation: They automate the validation and filing process with compliance-first fintech tools.
- System Integration: Their student information, billing, and financial aid systems are integrated, minimizing manual handoffs.
- Year-round Reconciliation: Instead of waiting until Q4, they reconcile student financial data throughout the year.
- Audit Readiness: They maintain clean records and complete audit trails that support filings without scrambling.
In fact, according to a 2024 report by the Higher Ed CFO Network, 61% of institutions that adopted automated 1098-T workflows reported zero IRS penalty notices in the last two years.
Benefits for CFOs and Decision-Makers
For university CFOs, 1098-T isn’t just about filing a form, it’s about risk management, cost control, and maintaining trust with students and regulators.
Missteps in compliance can cost your institution financially and reputationally. On the other hand, proactive and technology-driven 1098-T strategies reduce audit risk, free up staff time, and deliver stronger data accuracy year-round.
If your institution still treats 1098-T as a seasonal task, it’s time to reconsider that model.
Want to Learn How Leading Universities Do It?
To get a deeper look at what’s working, what’s changing, and what you can do now to prepare for the 2025 and 2026 seasons, join our upcoming session.
Webinar: How Fintech Is Powering 1098-T Compliance in Higher Ed
Featuring Jeffery Cronin, Chief Strategy Officer at Zenwork
In this session, you’ll learn how top-tier universities are modernizing their approach, avoiding penalties, and simplifying the 1098-T season through automation and integration. Reserve Your Seat Now
FAQs
1. How can automation help improve 1098-T compliance?
Automation significantly reduces human error and streamlines the validation process. By using fintech tools, universities can track tuition payments, scholarships, and enrollment status in real-time, ensuring accurate data entry and reducing the need for manual corrections. This system minimizes penalties and audit risks while improving the accuracy and efficiency of filings.
2. What’s the biggest challenge institutions face when managing 1098-T compliance?
The most common challenges stem from disconnected systems across student billing, registrar, and financial aid departments. Without system integration, universities struggle with data inconsistencies, manual reconciliation errors, and inadequate audit trails, all of which increase the risk of mistakes and penalties. The webinar will show how top universities address these issues through integration and automation.
3. How can universities ensure they are audit-ready for 1098-T filings?
Audit readiness requires maintaining accurate records and audit trails year-round. This includes tracking every data entry and update within the system, automating compliance checks, and regularly reconciling student financial data. The session will highlight best practices for staying audit-ready, including how to prepare for IRS inquiries and maintain transparent, defensible filing processes.
4. What changes are coming to 1098-T compliance in 2025 that universities need to be aware of?
In 2025, the IRS is increasing enforcement and using advanced analytics to detect discrepancies, making accurate and timely filings more critical. Penalty thresholds are higher, and student financial data is becoming more complex. The webinar will cover how institutions can navigate these changes and implement strategies to remain compliant while reducing risks.
5. How can CFOs move beyond the “seasonal” approach to 1098-T and make it a year-round priority?
The key to moving beyond the seasonal approach is embedding 1098-T compliance into everyday financial operations. This involves automating the filing process, integrating systems, and reconciling data continuously. In the webinar, Jeffery Cronin will share actionable steps for CFOs to turn 1098-T compliance into a strategic, ongoing effort rather than a last-minute task.
