BENTONVILLE — NorthWest Arkansas Community College is one of many institutions across the country recently targeted by the Internal Revenue Service for failing to provide accurate information on certain tax forms.
The college received a letter Sept. 3 from the IRS proposing a penalty of $37,500 because of incorrect taxpayer identification numbers or Social Security numbers on its 1098-T forms for 2011, said Rai Starr, college controller, at a Board of Trustees meeting Monday.
Colleges and universities are required to issue 1098-T forms to help determine a student’s eligibility for the American Opportunity Tax Credit and the Lifetime Learning Tax Credit.
The National Association of College and University Business Officers has taken up the issue with the IRS because so many other schools nationwide have received notices similar to what the college received, Starr said.
The association believes the IRS’s use of financial penalties for missing or incorrect taxpayer identification numbers is inappropriate, according to a report it issued earlier this month. Colleges and universities have been required to file 1098-T forms for more than a decade, but this is the first year in which the IRS has proposed penalties for missing or incorrect information, the association reported.
The college had 45 days to respond to the letter from the IRS but received a 30-day extension, making the response deadline Nov. 17.
“We will be writing our response,” Starr said. “In the meantime we will be looking at our processes. We’re doing our due diligence.”
Schools are unable to use an IRS-approved service to verify taxpayer identification numbers reported on information returns, but the IRS has its own matching system to verify those numbers. That’s part of the reason Starr called the proposed penalty “unfair.”
The $37,500 penalty against the college is based on a $100 penalty for each information return document sent with a missing or incorrect taxpayer identification number, according to the IRS’s letter.
In other news from Monday’s board meeting, college president Evelyn Jorgenson said work-study students furloughed Monday because of the federal government shutdown probably will be allowed back to work this week.
The government shutdown prompted a memorandum from Gov. Mike Beebe last week stating any programs or employees wholly or partially dependent on federal money that cannot draw on that money during the shutdown are to be suspended.
Jorgenson said she decided to furlough the college’s 51 work-study students because she wanted to make sure the college could draw on money paid to work-study students.
“I’m just conservative with this and I want to make sure the dollars are there,” she said.
It now appears the money will be available. Jorgenson said the college will be double-checking that today.
“We need them at work, and they need the money to help them pay for school,” Jorgenson said.
Work-study programs provide part-time jobs at $7.25 per hour for students with financial need. The jobs consist mostly of administrative support and clerical work.